Creature From Jekyll Island by G. Edward

RETURN OF THE NEW YORK 'MONEY TRUST'

The greatest power struggle arose from the New York Reserve Bank which was headed by Benjamin Strong. Strong had the contacts and the experience. It will be recalled that he was one of the seven who drafted the cartel's structure at Jekyll Island. He had been head of J.P. Morgan's Bankers Trust Company and was closely associated with Edward Mandell House. He had become a personal friend of Montagu Norman, head of the Bank of England, and of Charles Rist, head of the Bank of France. Not least of all, he 1. Galbraith, p. 130.

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was head of the New York branch of the System which represented the nation's largest banks, the 'money trust' itself. From the outset, the national board and the regional branches were dominated by the New York branch. Strong ruled as an autocrat, determining Fed policy often without even consulting with the Federal Reserve Board in Washington.

The United States entry into World War I provided the impetus for increasing the power of the Fed. The System became the sole fiscal agent of the Treasury, Federal Reserve Notes were issued, virtually all of the gold reserves of the nation's commercial banks were gathered together into the vaults of the Federal System, and many of the legislative restraints placed into the original Act were abandoned. Voters ask fewer questions when their nation is at war.

The concentration of power into the hands of the very 'money trust' the Fed was supposed to defeat, is described by Ferdinand Lundberg, author of America's Sixty Families:

In practice, the Federal Reserve Bank of New York became the fountainhead of the system of twelve regional banks, for N e w York was the money market of the nation. The other eleven banks were so many expensive mausoleums erected to salve the local pride and quell the Jacksonian fears of the hinterland. Benjamin Strong,... president of the Bankers Trust Company [J.P. Morgan] was selected as the first Governor of the N e w York Reserve Bank. An adept in high finance, Strong for many years manipulated the country's monetary system at the discretion of directors representing the leading New York banks.

Under Strong the Reserve System, unsuspected by the nation, was brought into interlocking relations with the Bank of England and the Bank of France.

BAILING OUT EUROPE

It will be recalled from Chapters Twelve and Twenty that it was this interlock during World War I that was responsible for the confiscation from American taxpayers of billions of dollars which were given to the central banks of England and France. Much of that money found its way to the associates of J.P. Morgan as interest payments on war bonds and as fees for supplying munitions and other war materials.

Seventy per cent of the cost of World War I was paid by inflation rather than taxes, a process that was orchestrated by the 1- Lundberg, p. 122.

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THE CREATURE FROM JEKYLL ISLAND

Federal Reserve System. This was considered by the Fed's supporters as its first real test, and it passed with flying colors. American inflation during that period was only slightly less than in England, which had been more deeply committed to war and for a longer period of time. That is not surprising inasmuch as a large portion of Europe's war costs had been transferred to the American taxpayers.

After the war was over, the transfusion of American dollars continued as part of a plan to pull England out of depression. The methods chosen for that transfer were artificially low interest rates and a deliberate inflation of the American money supply. That was calculated to weaken the value of the dollar relative to the English pound and cause gold reserves to move from America to England.

Both operations were directed by Benjamin Strong and executed by the Federal Reserve. It was not hyperbole when President Herbert Hoover described Strong as 'a mental annex to Europe.'

Before Alan Greenspan was appointed as Chairman of the Federal Reserve by President Reagan in 1987, he had served on the Board of the J.P. Morgan Company. Before that, however, he had been an outspoken champion of the gold standard and a critic of the System's subservience to the banking cartel. In 1966 he wrote: When business in the United States underwent a mild contraction in 1927, the Federal Reserve created more paper reserves in the hope of forestalling any possible bank reserve shortage. More disastrous, however, was the Federal Reserve's attempt to assist Great Britain who had been losing gold to us.... The ' F e d ' succeeded: it stopped the gold loss, but it nearly destroyed the economies of the world in the process. The excess credit which the Fed pumped into the economy spilled over into the stock market—triggering a fantastic speculative boom.... As a result, the American economy collapsed.

After his appointment to the Fed , Greenspan became silent on these issues and did nothing to anger the Creature he now served.