Creature From Jekyll Island by G. Edward

Warburg. The creation of a powerful Federal Reserve Board was also his idea as a means by which the regional branches could be absorbed into a central bank with control safely in New York.

Professor Edwin Seligman, a member of the international banking family of J&W Seligman, and head of the Department of Economics at Columbia University, explains and praises the plan: It was in my study that Mr. Warburg first conceived the idea of presenting his views to the public.3... In its fundamental features the Federal Reserve Act is the work of Mr. Warburg more than any other man in the country.... The existence of a Federal Reserve Board creates, in everything but in name, a real central bank.... Mr. Warburg had a practical object in view.... It was incumbent on him to remember that the education of the country must be gradual and that a large part of the task was to break down prejudices and remove suspicion. His plans therefore contain all sorts of elaborate suggestions designed to guard the public against fancied dangers and to persuade the country that the general scheme was at all practicable. It was the hope of Mi.

Warburg that with the lapse of time it may be possible to eliminate 1. Krooss, Vol. Ill, 1969 edition, p. 1202.

2. Quoted by Kolko, Triumph, p. 235.

3. Most historians share Seligman's view regarding Warburg's seminal role in the creation of the Federal Reserve System. Certain participants in the drama, however, apparently eager to capture some of the spotlight of fame for themselves, are in vigorous disagreement. For example, William McAdoo, Secretary of the Treasury at the time, says: 'This assertion is so completely erroneous that it must have emanated from ignorance rather than mendacity.' See McAdoo, p. 281. Competing egos notwithstanding, an objective reading of the record leads to the conclusion that, while others no doubt provided great input in the areas of technical drafts and political negotiations, the essence of the plan, its overall concept and the rationale that was put forward to sell the plan to Congress was essentially the product of Warburg's twisted genius.

COMPETITION IS A SIN 441

from the law not a few clauses which were inserted largely, at his suggestion, for educational purposes.1

THE ALDRICH BILL

The first draft of the Jekyll Island plan was submitted to the Senate by Nelson Aldrich but, due to the Senator's unexpected illness when he returned to Washington, it was actually written by Frank Vanderlip and Benjamin Strong.2 Although it was co-authored by Congressman Vreeland, it immediately became known as the Aldrich Bill. Vreeland, by his own admission, had little to do with it either, but his willingness to be a team player in the game of national deception was of great value. Writing in the August 25, 1910, issue of The Independent, which incidentally was owned by Aldrich himself and was anything but independent, Vreeland said: 'The bank I propose.... is an ideal method of fighting monopoly. It could not possibly itself become a monopoly and it would prevent other banks combining into monopolies. With earnings limited to four and one-half per cent, there could not be a monopoly.'

What an amazing statement. It is brilliantly insidious because of the half truths it contains. It is true that monopolies cannot-or at least do not—operate at four and one-half per cent interest. But it is untrue that the Federal Reserve banks were to be held to that lowly rate. It is true that four per cent was the stated amount they would earn on the stock purchased in the System, but it is also true that the real profits were to be made, not from stock dividends, but from the harvesting of interest payments on fiat money. To this was to be added the profits made possible from operating on smaller safety margins yet still being protected from bankruptcy. Furthermore, being on the inside of the nation's central bank would make them privy to the important money-making data and decisions long before their competitors. The profits that could be derived from such an advantage would be equal to or even greater than those from the Mandrake Mechanism. It is true that the Federal Reserve was to be a private institution, but it is certainly not true 1- Edwin Seligman, Proceedings of the Academy of Political Science, Vol IV No 4

(New York: 1914), pp. 3-6. '

2- Vanderlip, 'From Farm Boy to Financier,' p. 72.

t / A B e t t e r S y s t e m of Banking and Currency,' by Edward B. Vreeland, The

''dependent, August 25,1910, p. 394.

442 THE CREATURE FROM JEKYLL ISLAND

that this was to mark the disappearance of the government from the hanking business. In fact, it was just the opposite, because it marked the appearance of the government as a partner with private bankers and as the enforcer of their cartel agreement. Government would now become more deeply involved than ever before in our history.

Half truths and propaganda notwithstanding, the organizational structure proposed by the Aldrich Bill was similar in many ways to the old Bank of the United States. It was to have the right to convert federal debt into money, to loan that money to the government, to control the affairs of regional banks, and to be the depository of government funds. The dissimilarities were in those provisions which gave the Creature