Happy birthday, Federal Reserve
Today is the Federal Reserve's 100th birthday and to add to the festivities, the popping of champagne corks, puffing of fat cigars, slaps on the back, and lavish dinners in bankers' homes all around this country, I would like to help the rest of us commemorate this day by telling you the story of its birth. You may feel far removed from the machinations of these East Coast bankers, but even here in Fairfield, we have felt the sting of bank failures, panics, recessions, and depressions. They hit us as unemployment, foreclosures, and mightily reduced expectations, for ourselves, our businesses, and our children.
Many history books will tell you that the drive for a national banking system came from the Bank Panic of 1907. Americans had suffered through such panics and depressions in the 1870's and 1890's and 1907 was "the last straw." In 1908, President Teddy Roosevelt signed into law a bill establishing the National Monetary Commission to investigate ways to modernize our nation's banking industry to protect the American public from these types of manufactured banker shenanigans. Heading this group on a two-year taxpayer-paid tour of European central banks was Senator Nelson Aldrich. But the real work was not done by the public members of the Aldrich Commission, as Forbes Magazine founder Bertie Charles Forbes wrote in 1916: "Picture a party of the nation's greatest bankers stealing out of New York on a private railroad car under cover of darkness, stealthily riding hundreds of miles South, embarking on a mysterious launch, sneaking onto an island deserted by all but a few servants, living there a full week under such rigid secrecy that the names of not one of them was once mentioned, lest the servants learn the identity and disclose to the world this strangest, most secret expedition in the history of American finance. I am not romancing; I am giving to the world, for the first time, the real story of how the famous Aldrich currency report, the foundation of our new currency system, was written."
Forbes is describing the famous/infamous Jekyll Island meeting where representatives of the J.P. Morgan, Rockefeller, and Rothschild banks met to discuss and design a banking system that would best serve their interests. Republican Senator Aldrich presented this plan to Congress, but it since he was so intertwined with the nation's large bankers, it was soon publically given the disparaging term, "The Bankers' Plan." The plan's main author, Jekyll Island participant, Paul Warburg, quickly re-wrote the bill and it was again presented to Congress, this time by the Democrats, as the "Glass-Owen Bill."
Paul Warburg, having written both bills, reassured his banker buddies: "Brushing aside the external differences affecting the "shells,' we find the "kernels' of the two systems very closely resembling and related to each other." Fellow Jekyll Island collaborator, Frank Vanderlip wrote, "Although the Aldrich Federal Reserve Plan was defeated when it bore the name Aldrich, nevertheless its essential points were all contained in the plan that finally was adopted."
Shortly before he signed the "Glass-Owen Bill" into law, President Woodrow Wilson addressed Congress with these words: "And the control of the system of banking and of issue, which our new laws are to set up, must be public, not private, must be vested in the government itself, so that the banks may be the instruments, not the masters, of business and individual enterprise and initiative." Nice words, but the legislation creating the Federal Reserve that he signed into law 100 years ago today, was written by and for the big bankers and all control is vested in private hands, not public. So, happy birthday, master.
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