eight months frightened the nation with its awesome, if inconclusive, statistics on the power of Wall Street over the nation's economy.... Five banking firms, the elaborate tables of the committee showed, held 341 directorships in 112 corporations with an aggregate capitalization of over $22 billion. T h e evidence seemed conclusive, and the nation was suitably frightened into realizing that reform of the banking system w a s urgent—presumably to bring Wall Street under control....
T h e orgy of Wall Street w a s resurrected by the newspapers, who quite ignored the fact that the biggest advocates of banking reform were the bankers themselves, bankers with a somewhat different view of the problem.... Yet it was largely the Pujo hearings that m a d e the topic of banking reform a serious one.
Kolko has touched upon an interesting point. Almost no one put any significance to the fact that some of the biggest bankers on Wall Street were the first marchers to lead the parade for banking reform. The most conspicuous among these was Paul Warburg of Kuhn, Loeb & Company who, for seven years prior to passage of the Federal Reserve Act, travelled around the country doing nothing but giving 'reform' speeches and writing scholarly articles for the media, including an eleven-part series for
COMPETITION IS A SIN
445
joined in and made regular appearances before professional and political bodies echoing the call for reform. Yet no one paid any attention to the unmistakable odor of fish.
ENLISTING THE HELP OF ACADEMIA
The speeches and articles by big-name bankers were never intended to sway the public at large. They served the function of putting forth the basic arguments and the technical details which were to be the starting point for the work of others who could not be accused of having self-serving motives. To carry the message to the voters, it was decided that representatives from the world of academia should be enlisted to provide the necessary aura of respectability and intellectual objectivity. For that purpose, the banks contributed a sum of $5 million to a special 'educational'
fund, and much of that money found its way into the environs of three universities: Princeton, Harvard, and the University of Chicago, all of which had been recipients of large endowments from the captains of industry and finance.
It was precisely at this time that the study of 'economics' was becoming a new and acceptable field, and it was not difficult to find talented but slightly hungry professors who, in return for a grant or a prestigious appointment, were eager to expound the virtues of the Jekyll Island plan. Not only was such academic pursuit financially rewarding, it also provided national recognition for them as pioneers in the new field of economics. Galbraith says: Under Aldrich's direction a score or more of studies of monetary institutions in the United States and, more particularly, in other c o u n t r i e s w e r e c o m m i s s i o n e d f r o m the e m e r g e n t e c o n o m i c s profession. It is at least possible that the reverence in which the Federal Reserve System has since been held by economists owes something to the circumstance that so many who pioneered in the profession participated also in its [the System's] birth.1
The principal accomplishment of the bank's educational fund was to create an organization called the National Citizens' League.
Although it was entirely financed and controlled by the banks under the personal guidance of Paul Warburg, it presented itself merely as a group of concerned citizens seeking banking reform.
The function of the organization was to disseminate hundreds of 1- Galbraith, p. 121.
446 THE CREATURE FROM JEKYLL ISLAND
thousands of 'educational' pamphlets, to organize letter-writing campaigns to Congressmen, to supply quotable material to the news media, and in other ways to create the illusion of grass-roots support for the Jekyll Island plan.
Nathaniel Stephenson, in his biography of Nelson Aldrich, says: 'The league was non-partisan. It was careful to abstain from emphasizing Senator Aldrich.... First and last, hundreds of thousands of dollars were spent by the league in popularizing financial science.'1
The man chosen to head up that effort was an economics professor by the name of J. Laurence Laughlin. Kolko says that
'Laughlin, nominally very orthodox in his commitment to laissez faire theory, was nevertheless a leading academic advocate of banking regulation ... and was sensitive to the needs of banking as well as the realities of politics.'2 Did his appointment bring intellectual objectivity to the new organization? Stephenson answers: 'Professor Laughlin of the University of Chicago was given charge of the League's propaganda.'3 To which Congressman Lindbergh adds this reminder: 'The reader knows that the University of Chicago is an institution endowed by John D. Rockefeller with nearly fifty million dollars. It may truly be said to be the Rockefeller University.'4
This does not necessarily mean that Laughlin was purchased like so many pounds of hamburger and told by Rockefeller what to say and do. It doesn't work that way. The professor undoubtedly
