Banking in the period immediately prior to passage of the Federal Reserve Act was subject o a myriad of controls, regulations, subsidies, and privileges at both the federal and state levels. Popular history portrays this period as one of unbridled competition and free banking. Wall Street, however, wanted more government participation. The New York bankers particularly wanted a "lender of last resort" to create unlimited amounts of fiat money for their use in the event they were exposed to bank runs or currency drains. They also wanted to force all banks to follow the same inadequate reserve policies so that more cautious ones would not draw down the reserves of the others. An additional objective was to limit the growth of new banks in the South and West.
This was a time of growing enchantment with the idea of trusts and cartels. For those who had already made it to the top, competition was considered chaotic and wasteful. Wall Street was snowballing into two major banking groups: the Morgans and the Rockefellers, and even they had largely ceased competing with each other in favor of cooperative financial structures. But to keep these cartel combines from flying apart, a means of discipline was needed to force the participants to abide by the agreements. The federal government was brought in as a partner to serve that function.
To sell the plan to Congress, the cartel reality had to be hidden and the name "central bank" had to be avoided. The word Federal was chosen to make it sound like it was a government operation; the word Reserve was chosen to make it appear financially sound; and the word System (the first drafts used the word Association) was chosen to conceal the fact that it was a central bank. A structure of 12 regional institutions was conceived as a further ploy to create the illusion of decentralization, but he mechanism was designed from the beginning to operate as a central bank closely modeled after the Bank of England.
The first draft of the Federal Reserve Act was called the Aldrich Bil and was co-sponsored by Congressman Vreeland, but it was not the work of either of these politicians. It was the brainchild of banker Paul Warburg and was actually written by bankers Frank Vanderlip and Benjamin Strong.
Aldrich's name attached to a banking bill was bad strategy, because he was known as a Wall Street Senator. His bill was not politically acceptable and was never released from committee. The groundwork had been done, however, and the time had arrive to change labels and political parties. The measure would now undergo minor cosmetic surgery and reappear under the sponsorship of a politician whose name would be associated in the public mind with anti-Wall Street sentiments.
Get the book for yourself or for others you want to wake up. It reads like a mystery novel and is filled with colorful metaphors that make the seemingly complex world of banking very easy to comprehend. Visit RealityZone for your copy today. Summary is re-printed with permission from G. Edward Griffin.
See other parts below:
PART 1: The Journey to Jekyll Island
PART 2: The Name of the Game is Bailout
PART 3: Protectors of the Public
PART 4: Home, Sweet Loan
PART 5: Nearer to the Heart's Desire
PART 6: Building the New World Order
PART 7: The Barbaric Metal
PART 8: Fool's Gold
PART 9: The Secret Science
PART 10: The Mandrake Mechanism
PART 11: The Rothschild Formula
PART 12: Sink the Lusitania!
PART 13: Masquerade in Moscow
PART 14: The Best Enemy Money Can Buy
PART 15: The Lost Treasure Map
PART 16: The Creature Comes to America
PART 17: A Den of Vipers
PART 18: Loaves and Fishes and Civil War
PART 19: Greenbacks and Other Crimes
PART 20: The London Connection
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