As the establishment of a Central Bank in any country has been a crucial step and one about which much is written and debated, the following information about the establishment of the Federal Reserve Bank in the United States should be informative.
The first Bank of the United States was chartered by Congress in 1791 for twenty years with a capital stock of $10,000,000, of which $2,000,000 was to be in gold, twenty per cent of the stock was to be held by the government and the remaining eighty per cent by private individuals.
Although members of Congress subscribed for about one-third of the stock, already there were conspiracy theories that the Bank of the United States was secretly in the hands of foreigners, especially the Bank of England
Thomas Jefferson wrote:
"...the central bank is an institution of the most deadly hostility existing against the principles and form of our constitution..."
The large number of state-chartered private banks, nearly 250 of them, soon led to a position where the bank notes in circulation were far in excess of the amount of gold or silver redeemable. As a result the second Bank of the United States was chartered in April 1816 for a period of twenty years with a larger capital stock of $35,000,000 and once again the government held only twenty per cent.
In 1832, during the re-election year of President Andrew Jackson, the president of the bank attempted to get the re-chartering done four years earlier than it was due. Jackson, however, saw the bank as a British conspiracy to control American financial markets and did not allow an election year to cloud his judgement. He vetoed the re-chartering and then withdrew all the government's deposits.
In 1836 a speculative bubble developed in American land prices and Jackson tried to deflate it by passing the Specie Circular, which demanded that all payments for federal land be paid for in either gold or silver. It was believed that this resulted in the 1837 crash in land prices. However, research in the 1960s put forward the theory that the land price bubble was independent of the Bank of United States' closure and that the real culprit was the soaring imports of Mexican silver. When this supply dried up in 1837, the crash occurred.
The speculative bubble attracted the interest of the Rothschilds, and a representative, August Belmont, was sent over from Europe. He soon bought up American government stocks and wormed his way into the White House, eventually becoming Andrew Jackson's financial adviser.
The publication "The Rothschilds - the financial rulers of nations" details a secret meeting in London in 1857 at which the international banking syndicate decided to cause a civil war for the purpose of forcing the creation of yet another Central Bank.
The American Civil War started on April 12th, 1861, four years after the meeting of the Rothschilds in London. President Abraham Lincoln believed that that there were conspiratorial forces behind the south.
"Combinations too powerful to be suppressed by the ordinary machinery of peacetime government had assumed control of various southern states."He then, in 1862 issued the famous "greenbacks".
The Rothschild family were accused of making another attempt to force the creation of a privately-owned central bank in America in 1907. Acting as their agent in this conspiracy theory was the American banker, J. P. Morgan.
Morgan returned to the United States after receiving instructions in Europe to precipitate a banking crisis. He started rumours that the Knickerbocker Bank in New York was insolvent. Such was his personal reputation in Wall Street that other investors believed him and there was a run on the bank, followed by similar runs on others.
The panic of 1907 raised serious doubts about the trustworthiness of state-chartered banks. Once again the call for a central bank emerged. Morgan's activities were criticised, but the President of Princeton University, Woodrow Wilson, came to his defence, For a future President of the United States, he made a curious comment about J. P. Morgan,
..."all this trouble could be averted if he appointed a committee of six or seven public-spirited men like J. P. Morgan to handle the affairs of our country..."
Considering that Morgan initiated the panic, is it possible to believe that he exposed the insolvency of the Knickerbocker Bank out of a spirit of public concern or out of competitive financial greed?
The creation of the Federal Reserve, America's Central Bank, was shrouded in secrecy right from the start. The individual senator who was selected by the bankers to introduce the legislation was Nelson Aldrich, the maternal grandfather of Nelson and David Rockefeller. He was appointed head of a national monetary commission and spent two years touring the great banking houses of Europe, learning the secrets of operating a central bank.
In November 1910, he returned to the United States and boarded a train in Hoboken, New Jersey. Fellow passengers on board the train were:
Piatt Andrew, assistant Secretary of the Treasury;
Frank Vanderlip, president of Kuhn-Loeb's National City Bank of New York;
Paul Warburg. partner in Kuhn-Loeb & Co.,;
Henry Davidson, senior partner of J. P. Morgan;
Benjamin Strong, president of Morgan's Bankers' Trust Co.;
Charles Norton, president of Morgan's First National Bank of New York.
It is worth mentioning that on J. P. Morgan's death it was found that he actually owned only 19 percent of J. P. Morgan & Co.
It is suggested that the secrecy surrounding this meeting probably stemmed from the desire to keep the public in ignorance of the involvement of J. P. Morgan, who had after all been responsible for the panic of 1907.
The legislation written as it was by bankers, still had to go through Congress. Its passage through the house and the Senate would be in vain if the incumbent President would be willing to veto the bill. Unfortunately for the J. P. Morgan secret group, such a President was in office at the time, William Howard Taft. He had made it clear that he would veto any such bill if it were presented to him to sign.
The campaign against Taft was three-fold. The secret group tried to prevent him from gaining the Republican nomination by supporting ex-President Teddy Roosevelt. When this failed, they supported the Democratic candidate, Woodrow Wilson.
When it was realised that Wilson would not get enough votes to defeat Taft, the group urged Teddy Roosevelt to run against both Taft and Woodrow Wilson as an independent. They hoped that Roosevelt would draw Republican votes away from Taft without influencing Wilson's figures. The ploy worked. Wilson won 45 per cent of the vote, and Roosevelt beat Taft into third place.
With Woodrow Wilson in the White House the Federal Reserve Bill was duly signed.
However the so-called "Aldrich Plan" failed to pass the House of Representatives. The idea that bankers would control the Federal Reserve found great opposition within the Democratic Party. The plan had to be adjusted to allow private ownership but public control. The president would appoint officials on to the Federal Reserve Board. Control therefore of the nation's finances would come, not through the central bank, but through influencing the chairman,( at this moment Ben Bernanke,) and the publicly appointed officials.
For information on the foundation of the Bank of England try www.paragoy.com