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Chapter Nine THE MONEY TRUST CONS CONGRESS: The Federal Reserve Conspiracy by Antony C.Sutton from archive.org
Chapter Nine
THE MONEY TRUST CONS CONGRESS
Congressional passage of the Federal Reserve Act in
December, 1913, must count as one of the more disgraceful
unconstitutional perversions of political power in American
history.
Certainly it is hard to think of any Act that has had greater
effect and illegally transferred more monopoly power to a
conspiratorial clique. These are harsh words. The reader may
judge if they are accurate after reading this chapter: an almost
hour by hour detail of the passage of the Act and signature by
President Wilson.
The Act transferred control of the monetary supply of the
United States from Congress to a private elite. Paper fiat currency
replaced gold and silver. Wall Street financiers were able now to
tap an unlimited supply of fiat money at no cost.
Yet, as Senator Townsend stated: "This bill did not originate
in any party platform. The people have not expressed themselves
on it anywhere and at any time." 1 - 1 ' An extraordinary lobbying
effort surrounded the bill just as today in the 1990s an
extraordinary amount of lobbying is brought forth by any attempt
to curtail or even investigate the Fed. In 1913 the Democratic
Party leadership came
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The Federal Reserve Conspiracy
under strong pressure from Woodrow Wilson and New York banking
lobbyists to ensure that opposition did not water down the currency bill
and allow other private interests to become stockholders.
Witness the complaint of Senator Gilbert Minell Hitchcock, an
independent-minded gentleman from Nebraska and publisher of the
Omaha World Herald. The Bill had come to the Senate from the House:
Mr. HITCHCOCK: "Sacred document" as it came from the House,
of which, as I have said, we were forbidden to dot an "i" or to
cross a "t. "
Mr. OWEN: By whom?
Mr. HITCHCOCK: And which we were commanded to pass
without a hearing and without much investigation.
Mr. POMERENE: Mr. President, I have been around these
hallowed precincts for some time, and I have not heard that
anybody has forbidden anybody else to change his views or to
criticize any bill that came from the House, or any bill that origi-
nated here. Anyone has a right to change his view. The Senator
himself has changed his view a number of times. I say that not to
his discredit, but simply for the purpose of showing that he has
been a free moral agent all these weeks.
Mr. HITCHCOCK: Mr. President...
Mr. OWEN: The Senator from Nebraska did not tell us by whom
he had been ordered not to dot an "i" nor cross a "t," and I would
be glad if the Senator would disclose that valuable information,
unless it is confidential with the Senator.
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_The Money Trust Cons Congress
Mr. HITCHCOCK: I think I will leave that for the country to
judge. I will take my chances on it.
Mr. OWEN: If the Senator is content to leave that as an
insinuation, it is for the Senator to do so.
Mr. HITCHCOCK: I will take that liberty. (2)
On September 18, 1913 the Glass Bill, the house version of the
Morgan central banking bill, passed the House of Representatives by an
overwhelming margin of 287 to 85. Most Congressmen had no idea
what the bill was about. There were no amendments. Members voted
for or against, and only the brave voted against. This Glass bill was
named after Congressman Carter Glass of Virginia (1858-1946) - a
banker (a director of the United Loan and Trust and the Virginia Trust
Company).
The Glass Bill then went to the Senate and became the Owen Bill
after Senator Robert Latham Owen (1856-1947) of Oklahoma,
Chairman of the Senate Finance Committee -and a banker (a major
stockholder in the First National Bank of Muskogee).
The Senate took exactly 4 1/2 hours to debate and adopt the Owen
Bill, 43 to 25. The Republicans did not even see the conference report.
This is normally read to the floor. No member of the Senate could have
known of its contents and some Senators even stated on the floor of the
Senate that they had no knowledge of the contents of the Owen Bill.
At 6:02 p.m. on the same day the Bill was hurried through the
Senate without discussion. President Woodrow Wilson signed the
Federal Reserve Act of 1913 into law.
A detailed review of the Senate debate indicates the Senators had
no details to discuss and every criticism went unanswered. Republican
Senator Bristow (1861-1944) made bitter comments on the obvious
conflict of interest:
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The Federal Reserve Conspiracy
My allegation is that this bill has been drawn in the interests
of the banks; that the Senator from Oklahoma, as the chairman of
the committee, is largely interested in banks; that the profits which
will accrue to those banks directly will add to his personal
fortune; that he has voted to increase the dividends on the stock of
the regional banks, which will be paid to the member banks, from
5 per cent to 6 per cent; that he has voted against permitting the
public to hold the stock of these regional banks and has insisted
that it shall be held by the member banks; and that he has voted
against giving the Government the control of the regional banks
and in favor of the banks controlling the regional banks, and it is
for him to say whether he has violated the rule laid down in
Jefferson's Manual. (3)
The Senate debate, for what it was worth without a conference
report, culminated in a test of political strength on Monday, December
15, 1913. At this vote the amendments proposed by Senator Hitchcock -
the only Democrat working against the bill - were tabled by a vote of 40
to 35.
Hitchcock's amendments were aimed to make the Federal Reserve
System a government rather than a private monopoly, i.e., the control of
the Money Trust would be placed in the Department of the Treasury.
It is interesting that the Senate would overwhelmingly refuse to
place control of the money supply within the Treasury and prefer to
hand it over to the House of Morgan. Colonel House had done his work
well.
On rereading the lengthy rambling debate, the likelihood of price
inflation was recognized. The argument was a common sense approach
that without the discipline of limited gold and silver, the pressure of
unlimited flat money would lead to price inflation. The only argument
against was
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The Money Trust Cons Congress
a rather weak "sound bankers would not allow price inflation."
Note that we use the term price inflation. In 1913 the term
inflation always referred to "currency inflation," i.e., expansion of the
note issue. In the intervening decades the meaning has changed
entirely. Today when the term inflation is used it always refers to price
inflation, i.e., an increase in prices.
The key Senator warning of inflation (currency inflation) ahead
was Senator Root, who oddly accused Bryan, the pro-silver populist, as
the dominating influence behind the Federal Reserve Act (most
unlikely, and a probable red herring).
However, Root did warn of currency inflation and financial panic
but then defended the Glass-Owen bill on the grounds that no inflation
could come about "unless the sound money men who run the banks
brought it about."
Once again we have the Money power controlling the opposition,
i.e., proclaiming arguments that can be easily countered while ensuring
that the really potent criticisms do not see the light of day.
Today the irrefutable link between currency inflation and price
inflation is buried in a confusion of academic double-talk and algebraic
manipulation. Today's academic economists are so beholden to
mathematical manipulation (with the deluding plea of rigorousness) that
they have entirely overlooked fundamental economic truisms. With
very few exceptions (Hillsdale College, Ludwig von Mises Institute at
Auburn University), academic economic departments are willing pawns
of the modern money trust or the Federal Reserve System. (This author
can speak first hand of the abysmal ignorance of the UCLA Economics
Department in the early 1960s).
The reply to Reed came from Senator Hitchcock, who pointed out
that under the Bill, "the control of the currency
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The Federal Reserve Conspiracy
system of the country would have to be turned over to the bankers."
Others like Senator Weeks were unconcerned on the grounds that "the
United States has the most competent bank men in the world." But then,
Weeks was a banker himself.
The last speech on this Monday afternoon came from
Congressman Mann of Illinois, the Republican floor leader who made
the rather odd assertion that the U. S. was in the midst of a financial and
industrial panic which demanded passage of the Federal Reserve Act.
Tuesday, December 16, 1913
In Tuesday's Senate debate, Senator Root again emphasized the
danger of inflation from the proposed Federal Reserve Act. Constant
interruptions, according to the New York Times (December 17), suggest
that supporters of the bill were publicly worried. They argued in reply
that inflation was not possible if the securities issued were good
government securities - to which Root replied:
That is neither here nor there so far as my criticism of the
bill is concerned. My objection is that the bill permits a vast
inflation of our currency and that inflation can be accomplished
just as readily and just as certainly by loans of the Government
paper on good security as upon bad security...
emphasizing the point that;
no one denies that in the past from time to time great
commercial nations have found themselves moving along a tide of
optimism which, with the facilities of easy money has brought them
to a point of most injurious and serious collapse.
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The Money Trust Cons Congress
Root reinforced his "tide of optimism" argument as follows,
...judgement becomes modified by the optimism of the hour
and grows less and less effective in checking the expansion of
business as the period of expansion goes on.
He clinched the argument:
...instead of doing our duty as the responsible legislative
branch of the Government of the United States, we are shirking
that duty and throwing it upon a subordinate agency of the
government.
Unfortunately, Root did not push his argument to the limit, i.e.,
that this "subordinate agency of government" as he called it, was in
effect going to be a private money monopoly of national bankers.
The general response to warnings of inflation was to cite the
existence of a gold reserve backing for the money supply: proposed at
33 1/3 percent. For example, Senator Williams of Mississippi claimed
that the great inflation feared by Senator Root was only a "bare
mathematical possibility." Why? Because, argued Senator Williams,
"no President conceivably would appoint one member of the board who
believed in fiat money." Eighty years later, Senator Williams to the
contrary, every single member of the Federal Reserve Board and its
Regional Banks is an ardent believer in fiat money and an adversary of
gold! In President Wilson's era it was impossible to conceive that the
role of gold could ever cease. In President Clinton's era it is impossible
for policy makers to visualize that gold has any role at all.
Wednesday, December 17, 1913
On Wednesday the powerful behind-the-scenes pressure for the
Federal Reserve Act surfaced when the White House
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The Federal Reserve Conspiracy
announced that it expected the Senate to pass a currency bill before
Saturday, that the House would accept this Senate version of the bill
without changes and the bill would then go to the President for
signature on Christmas eve. The flaw with this hurry-up scenario was
that on Wednesday Senator Root's warnings about price inflation had
some effect and a Democratic Party caucus was called, during the short
dinner recess in the evening, to consider two of Root's proposals: (a)
that the note issue should be limited by law and (b) that the gold reserve
should be increased to 50 percent with a heavy tax on "depletions"
below this level.
After discussion the note limitation amendment was rejected, but
the caucus did adopt a proposal to increase the gold reserve to 40
percent while requiring that a portion of regional reserve bank earnings
be set aside as a gold reserve. It is interesting to note that the
Democratic majority was well aware of the discipline of gold and it was
not the intent of Congress in 1913 in any way to reject, or even limit
this discipline. In brief, the present day attempt to demonetize gold by
phasing it out of the monetary system was not only rejected by the
Congress of 1913 but the dangers of any such demonetization were
recognized as ominous for the welfare of the United States.
Even after the caucus, criticism was to be heard from a few
Senators. Senator Crawford of South Dakota didn't like the private
monopoly aspects at all:
...you are simply creating a bank of big bankers, a bank to
help big banks, but for which you assess the little banks to get the
capital. The little banks are simply commanded to carry wood and
water for the big banks. You say to the Vanderlips and the
Hepburns and the Morgans and the Reynoldses, "come in with
your short term paper and get the money" but you say to the
Smiths and
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The Money Trust Cons Congress
the Browns and the Joneses from the small country districts, "go
somewhere else with your long term farmers paper; we cannot
discount it. "
The intriguing aspect of the Wednesday evening is that while a
majority of Congress understood more or less the idea that the system
would be inflationary, they were apparently unwilling to bring
themselves to vote against the bill.
Thursday, December 18, 1913
By Thursday effective opposition had crumbled, and to speed
passage the Senate operated under a 15-minute rule. By this device half
a dozen Hitchcock amendments were disposed of and others proposed
in the previous night's Democratic Party caucus given little attention.
The debate records serious doubts and differences of opinion coupled
with predictions that the bill would become law before Christmas and
signed on Monday or Tuesday of the following week. The opposition
was sidetracked. Problems were overlooked. Fundamental questions,
including the possibility of inflation, were bypassed by the leadership.
One senses almost an air of panic - to pass a "currency bill," at whatever
cost. Consequently, although the bill was known to be defective, the
New York Times for Friday, December 19 ran its reporting under the
head, "Near end of tight on currency bill." The White House
promptly announced that it was considering names for Governor of the
Federal Reserve Board. The first name to be floated out of the White
House was that of James J. Hill of the Great Northern Railroad. It was
proposed by international banker James Speyer - confirming the behind-
the-scenes activity of bankers.
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The Federal Reserve Conspiracy
Friday, December 19, 1913
On Friday, December 19, the Friday before Christmas when
Congressional thoughts were more on Christmas trees than money
trees, the Senate passed President Wilson's currency bill without further
ado by an overwhelming vote of 54 to 34. Every Democrat in the
Senate, plus six Republicans and one Progressive Republican, voted for
the Federal Reserve system. Against the Federal Reserve were 34
Republicans. As a sop to criticism, the bill included a so-called "radical
amendment," i.e. that Congressmen could not serve on Federal Reserve
Boards.
Bankers, not unexpectedly, were reported to be "relieved" by the
passage of the bill - but not fully satisfied and still pressed for changes
in committee. William A. Gaston, President of the National Shawmut
Bank, spent some days in Washington in conference with members of
the House and Senate Currency Committees and commented: "...The
prospective conference changes will make the bill more workable for
the banks.-"
Edmund D. Hulbert, Vice President of Merchants Loan and Trust
Company, added to this: "...on the whole it is a sound bill and will do
much toward putting banking and currency on a sound footing. " (4)
W. M. Habliston, Chairman of the First National Bank of
Richmond, stated, "It will result in an elastic currency which will avert
panics," and Oliver J. Sands, President of the American National Bank,
commented that
The passage of the currency measure will have a beneficial
effect upon the country at large and its operation will help
business. It seems to me the beginning of an era of general
prosperity....
The only reported objection from bankers came from Charles
McKnight, President of National Bank for Western Pennsylvania: "It
will do the country no good...."
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The Money Trust Cons Congress
Saturday, December 20, 1913
After passage of the Owen bill in the Senate the measure was sent
to a joint House-Senate conference to iron out the major differences
between the Glass bill from the House and the Owen bill from the
Senate. This conference excluded all Republican members. The
conference then met for four hours on Saturday evening, December 20,
at which time at least 20 (some say 40) major points of difference in the
two versions were uncovered, in addition to minor disagreements in
language requiring over 100 corrections. In most of these minor items
the Senate yielded to the House. However, none of the 20 (40) major
differences were discussed in this Saturday evening conference, and it
was generally agreed that Monday passage of the joint bill was
extremely unlikely. As reported by the New York Times (December 21,
1913), "The points seriously at issue embody practically all the
substantial Senate amendments."
In an effort to work out some of the major differences, the
conferees agreed to meet all day Sunday. Further, on this Saturday the
full House met and refused to accept the Senate version of the bill by a
vote of 294 to 59 and then proceeded to pass amendments binding on
the House conferees.
By Saturday evening, December 20, 1913, the following were
some of the principal major points of dispute between the House and
the Senate and reflected significant, fundamental differences in the
approach to a currency bill:
First - the number of regional reserve banks,
Second - the question of guarantee of deposits,
Third - the amount of gold reserve to be required against the
circulating notes,
Fourth - the changes with respect to domestic acceptance in the
case of domestic and foreign trade,
Fifth - the changes in the reserve provisions,
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The Federal Reserve Conspiracy_
Sixth - the right of member banks to use the notes of the Federal
reserve banks for reserve purposes,
Seventh - the status of the two percent Government bonds used as
security for national bank notes,
Eighth - the Senate's provision with respect to an increase in
national bank circulation.
This was the legislative position late Saturday night.
Sunday, December 21, 1913
Quite what happened on this Sunday in Washington, D.C. we
shall never know for sure.
What we do know is that on Sunday morning the Senate-House
conferees were faced with more than 20 (some say 40) fundamental
differences on a critically important bill - a bill to affect the lives of
every American then and in the future. Yet, the following Monday
morning the New York Times (December 22) reported on the front page,
"Money Bill may be law today." The Times reported that in some
undisclosed way the House-Senate conferees had adjusted their
differences. The "newspaper of record" put it this way:
With almost unprecedented speed, the conference to adjust
House and Senate differences on the currency bill practically
completed its labors early this morning (Monday 22nd). On
Saturday the conferees did little more than dispose of the
preliminaries, leaving forty essential differences to be thrashed out
Sunday.
The "almost unprecedented" speed in the conference probably
occurred at a most unlikely time - between 1:30 a.m. and 4 a.m.
Monday, December 22. Let's look at that critical Monday in more
detail.
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The Money Trust Cons Congress
Monday, December 22, 1913
At midnight Sunday, December 21, either 20 or 40
(depending on the source) major points of disagreement required
resolution. At 11 p.m. Monday, 23 hours later, the House voted
298 to 60 and passed the Federal Reserve Act. During this brief
23 hours the major differences were reconciled, worded, sent to
the printer, set up in type, proofread, printed, distributed, read by
every member of the House, discussed, pondered, weighed,
deliberated, debated -and voted upon. This miracle of speediness,
never equaled before or after in the U.S. Congress, is ominously
comparable to the rubber stamp lawmaking of the banana
republics.
Mon. Dec. 22, 1913
1:30a.m. -
■ 4:30a.m.
House-Senate con
ferees adjust 20
(40) major differ-
ences in the two
bills.
4:30 a.m
Report handed to
printers
12 1/2 hours from
conference to
printed report
7:00 a.m
Proofs read
1:00 p.m.
Printed copies
delivered from
printers
2:00 p.m
Printed report on
Senate desks with
notification of a
meeting at 4 p.m.
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The Federal Reserve Conspiracy
4:00 p.m.
Republican members
of conference go to
Conference room -to
be told that a bill had
already been
concluded.
5 hours from printed
final report to House
vote.
6:00 p.m.
Printed conference
report submitted to the
House by
Congressman Glass -
most House members
go to the restaurant for
dinner while the bill is
read (1 1/2 hours).
7:30 p.m
Debate begins with a
20 minute speech by
Glass.
11:00 p.m.
The House votes 298
to 60 in favor of the
Federal Reserve Act.
The manner in which the Federal Reserve bill was handled by the
Democratic majority and specifically by banker-politician Senator
Owen and banker-politician Carter Glass is reflected in a complaint on
the Senate floor
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The Money Trust Cons Congress
by Senator Bristow of Kansas, the Republican leader, in which he
explains why he would not sign the conference report:
Mr. LA FOLLETTE: Would it disturb the Senator to inform
us who did participate in this conference and whether any Senator
declined to participate?
Mr. BRISTOW: As to those who participated in the
conference I am not advised. I was a member of the committee of
conference appointed by the President of the Senate, but I had no
knowledge as to the meeting of the conferees until after the report
as it is before us had been made, printed, and placed upon the
desks of Senators. I was then notified by the chairman of the
committee that there would be a meeting of the committee of
conference at 4 o'clock, two hours after this report of the
committee of conference of the two Houses of Congress on the bill
(H.R. 7837) to provide for the establishment of Federal reserve
banks, for furnishing an elastic currency, affording means of
rediscounting commercial paper, and to establish a more effective
supervision of banking in the United States, and for other
purposes, had been placed upon my desk. I, in company with the
Senator from Minnesota (Mr. Nelson), visited the room where we
were invited to appear. We found the chairman of the committee
and the Democratic members of the committee of conference there,
and were given to understand that they had perfected the
conference report. We were then invited to express our opinion of
it, but I preferred to express my opinion where it might appear in
the Record, rather than in the
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The Federal Reserve Conspiracy
privacy of the committee room, and that I shall undertake to do
this morning.
I see this report is signed by the Democratic members of the
committee. Of course, I did not sign it because I was not invited to
sign it, and I should not have done so, anyway, for I did not know
at the time the report was prepared what it contained, and I had
no opportunity of ascertaining what it contained.^
In brief, the Republican leader did not know what was in the Act
nor was he given the opportunity to find out what was in the Act. Later
in debate Bristow directly accused Owen of inserting provisions for the
profit of his own bank.
There were major abuses of the legislative process in the passage
of the Federal Reserve Act - sufficient to void the act. If we have a
society that lives by rules then there is no Federal Reserve Act.
Both Finance Committee Chairmen, Congressman Glass and
Senator Owen, had conflict of interest with personal banking interests
and stood to gain from the bill. Meetings to discuss the bill were held
without knowledge of committee members. Decisions were arrived at
and established without the knowledge and agreement of members.
Major sections of the bill were settled without consultation and
railroaded into final form. There is indisputable evidence of outside
banking influence upon Congress.
The Federal Reserve Act is, even from our superficial
investigation, suspect legislation. Most of Congress had no idea of the
contents of the final bill and certainly none had the opportunity to
reflect and consult with the broad base of the electorate. A private
money monopoly was granted to a few national bankers under suspect
circumstances.
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The Money Trust Cons Congress
As Congressman Lindbergh stated on December 23, 1913:
This Act established the most gigantic trust on earth. When
the President signs this bill, the invisible government by the
Monetary Power will be legalized. The people may not know it
immediately but the day of reckoning is only a few years
removed....
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The Federal Reserve Conspiracy
Chart 9-2: STAGE TWO: WOODROW WILSON IN DEBT
TO THE MONEY TRUST
George Perkins
.Cleveland
Bodge
$51,3t0
104
The Money Trust Cons Congress
Endnotes to Chapter Nine:
(1) Congressional Record: Senate, February 8, 1915.
(2) op. cit.
(3) op. cit.
(4) New York Times, December 20, 1913.
(5) Congressional Record: Senate, December 23, 1913, p. 1468.
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The Federal Reserve Conspiracy
Paul Volcker, employee of Chase Manhattan Bank and
Chairman of the Federal Reserve System in the 1970s.
106
Chapter Ten:
THE FEDERAL RESERVE TODAY
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