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Chapter 12 - Talking Heads and Invisible Hands

Who were these dominant men? Wilson only hinted, saying:
Some of the biggest men in the United States, in the field of
commerce and manufacture, are afraid of something. They know
that there is a power somewhere so organized, so subtle, so
watchful, so interlocked, so complete, so pervasive, that they
had better not speak above their breath when they speak in
condemnation of it.1
Many other leaders hinted that the government was controlled by
invisible puppeteers. President Franklin D. Roosevelt, Teddy
Roosevelt™s distant cousin, acknowledged in 1933:
The real truth of the matter is, as you and I know, that a financial
element in the large centers has owned the government since
the days of Andrew Jackson. . . . The country is going through a
repetition of Jackson™s fight with the Bank of the United States “
only on a far bigger and broader basis.
Felix Frankfurter, Justice of the Supreme Court, said in 1952:
The real rulers in Washington are invisible and exercise power
from behind the scenes.
Congressman Wright Patman, Chairman of the House Banking
and Currency Committee, said in a speech on the House floor in 1967:
In the U.S. today, we have in effect two governments. We have
the duly constituted government, then we have an independent,
uncontrolled and uncoordinated government in the Federal
Reserve, operating the money powers which are reserved to
congress by the Constitution.
Two decades later, Senator Daniel Inouye would state on the Con-
gressional Record at the conclusion of the Iran Contra hearings:
There exists a shadowy Government with its own Air Force, its
own Navy, its own fundraising mechanism, and the ability to
pursue its own ideas of national interest, free from all checks
and balances, and free from the law itself.2
In 1927, Mayor John Hylan of New York compared the invisible
government to a “giant octopus,” recalling the “hydra-headed mon-
ster” battled by Andrew Jackson. In a speech in the New York Times,
Hylan said:
The warning of Theodore Roosevelt has much timeliness
today, for the real menace of our republic is this invisible
government which like a giant octopus sprawls its slimy length

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over City, State, and nation . . . It seizes in its long and powerful
tentacles our executive officers, our legislative bodies, our schools,
our courts, our newspapers, and every agency created for the
public protection.
. . . [A]t the head of this octopus are the Rockefeller-Standard
Oil interest and a small group of powerful banking houses
generally referred to as the international bankers. The little coterie
of powerful international bankers virtually run the United States
government for their own selfish purposes.
They practically control both parties, write political
platforms, make catspaws of party leaders, use the leading men
of private organizations, and resort to every device to place in
nomination for high public office only such candidates as will
be amenable to the dictates of corrupt big business. . . .
These international bankers and Rockefeller-Standard Oil
interests control the majority of the newspapers and magazines
in this country. They use the columns of these papers to club
into submission or drive out of office public officials who refuse
to do the bidding of the powerful corrupt cliques which compose
the invisible government.3
In 1934, these international bankers and businessmen were labeled
the “Robber Barons” by Matthew Josephson in a popular book of the
same name.4 The Robber Barons were an unscrupulous lot, who “lived
for market conquest, and plotted takeovers like military strategy.” John
D. Rockefeller™s father was called a snake-oil salesman, flimflam man,
bigamist, and marginal criminal “ never convicted but often accused,
of crimes ranging from horse theft to rape. He once boasted, “I cheat
my boys every chance I get, I want to make ™em sharp.” Once the
Robber Barons had established a monopoly, they would raise prices,
drop the quality of service, and engage in unfair trading practices to
drive other firms out of business. The abuses of these monopolies be-
came such a national scandal that in 1890, the Sherman Antitrust Act
passed both houses of Congress with only one dissenting vote. The
problem was enforcing it. In 1888, the entire Commonwealth of Mas-
sachusetts had receipts of only $7 million to oversee a Boston railroad
monopoly with gross receipts of $40 million.5




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Chapter 12 - Talking Heads and Invisible Hands

Can You Trust a Trust?

“Trusts” are concentrations of wealth in the hands of a few. The
name came from the private banks entrusted with the money of
depositors. Paper bank notes were called “fiduciary” money (after
the Latin word fide, meaning to “trust”), because the bankers had to
be “trusted” to keep a sum of gold on hand to redeem their paper
receipts on demand.6 These fiduciary banks played a key role in
forming the giant trusts of the Gilded Age. The trusts had their own
private banks, which were authorized to create and lend money at
will. Like in the board game “Monopoly,” they used this paper money
to buy up competitors and monopolize the game.
Monopoly growth and abuse were at their height in the Gilded
Age, the country™s greatest period of laissez faire.i The trusts were so
powerful that the trend toward monopolizing industry actually wors-
ened after the Sherman Act was passed. Before 1898, there were an
average of 46 major industrial mergers a year. After 1898, the num-
ber soared to 531 a year. By 1904, the top 4 percent of American
businesses produced 57 percent of America™s total industrial produc-
tion, with a single firm dominating at least 60 percent of production
in 50 different industries. Ironically, the trusts became the strongest
advocates of federal regulation, since their monopoly power depended
on the exclusive rights granted them by the government. By planting
their own agents in the federal commissions, they used government
regulation to gain greater control over industry, protect themselves
from competition, and maintain high prices.

The Banks and the Rise of Wall Street

There were many Robber Barons, but J. Pierpont Morgan, Andrew
Carnegie, and John D. Rockefeller led the pack. Morgan dominated
finance, Carnegie dominated steel, and Rockefeller monopolized oil.
Carnegie built his business himself, and he loved competition; but Mor-
gan was a different type of capitalist. He didn™t build, he bought. He
took over other people™s businesses, and he hated competition. In
1901, Morgan formed the first billion dollar corporation, U.S. Steel,
out of mills he purchased from Carnegie.

i
French for “let it be” “ a policy of deliberate non-intervention in the
market.

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Rockefeller, too, dealt with competitors by buying them out. His
company, Standard Oil, became the greatest of all monopolies and
the first major multinational corporation. Before World War I, the
financial and business structure of the United States was dominated
by Morgan™s finance and transportation companies and Rockefeller™s
Standard Oil; and these conglomerates had close alliances with each
other. Through interlocking directorships, they were said to domi-
nate almost the entire economic fabric of the United States.7
Other industrialists, seeing the phenomenal success of the Morgan
and Rockefeller trusts, dreamt of buying out their competition and
forming huge monopolies in the same way. But with the exception of
Carnegie, no other capitalists had the money for these predatory prac-
tices. Aspiring empire-builders were therefore drawn to Morgan and
the other Wall Street bankers in search of funding. Corporations be-
gan drifting to New York to be near the big investment houses. By
1895, New York had become the headquarters for America™s major
corporations and the home of half its millionaires. Morgan™s bank at
23 Wall Street, known as the “House of Morgan,” was for decades the
most important address in American finance. In 1920, a bomb ex-
ploded in front of the bank, killing 40 and injuring 400. Later, the
nexus of American finance moved to the World Trade Center, the
chosen target for another tragic attack in 2001.
Early in the twentieth century, Morgan controlled a Wall Street
syndicate that financial writer John Moody called “the greatest
financial power in the history of the world.” Morgan dominated a
hundred corporations with more than $22 billion in assets. In 1913,
in a book called Other People™s Money and How the Bankers Use It,
Supreme Court Justice Louis Brandeis wrote that the greatest threat
to the American economy was the “money trust.” According to The
Wall Street Journal, the “money trust” was just another name for J.
Pierpont Morgan, who had founded the world™s most powerful bank.
Like the Rothschilds in England, Morgan had extraordinary political
influence in the United States. Morgan men routinely represented the
U.S. government at international monetary meetings, something they
continue to do today. Alan Greenspan, longstanding Chairman of
the Federal Reserve, was a corporate director for J. P. Morgan before
President Ronald Reagan appointed him to that post.8
Those fortunate corporations favored with funding from Morgan
and the other Wall Street bankers were able to monopolize their
industries. But where did the Wall Street banks get the money to

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Chapter 12 - Talking Heads and Invisible Hands

underwrite all these mergers and acquisitions? The answer was
revealed by Congressman Wright Patman and other close observers:
the Robber Barons were pulling money out of an empty hat. Their
privately owned banks held the ultimate credit card, a bottomless
source of accounting-entry money that could be “lent” to their affiliated
corporate mistresses. The funds could then be used to buy out
competitors, corner the market in scarce raw materials, make political
donations, lobby Congress, and control public opinion.

Who Pulled the Strings of the Robber Barons?

Rockefeller and Morgan were rivals who competed for power on
the political scene, but they both had the support of powerful British
financiers. John D. Rockefeller Sr. first made his fortune with some
dubious railroad rebate deals during the Civil War. By 1895, he had
acquired 95 percent of America™s oil refining business. Chase Bank
(named after Salmon P. Chase in honor of his role in passing the Na-
tional Banking Act) was bought by Rockefeller with financing traced
to the Rothschilds. The funds came from a New York banking firm
called Kuhn, Loeb, & Co., which was then under the control of a
German immigrant named Jacob Schiff. Schiff had bought into the
partnership with financial backing from the Rothschilds. He later
bought out Kuhn and married the eldest daughter of Loeb. The Man-
hattan Company (the banking firm established by Hamilton and Burr
at the turn of the nineteenth century) also came under the control of
the Rothschilds through the banking interests of Kuhn, Loeb and the
Warburgs, another Rothschild-related Frankfurt banking dynasty. In
1955, Rockefeller™s Chase Bank merged with the Manhattan Com-
pany to become the Chase Manhattan Bank.9
The Morgan family banking interest could be traced back to England
in an even more direct way. In the 1850s, Junius Morgan became a
partner in what would become Peabody, Morgan, and Company, a
London investment business specializing in transactions between
Britain and the United States. During the Civil War, the partnership
became the chief fiscal agent for the Union. John Pierpont Morgan,
Junius™ son, later became head of the firm™s New York branch, which
was named J. P. Morgan & Co. in 1895. J. P. Morgan Jr., John Pierpont™s
son, then became a partner in the branch in London, where he moved
in 1898 to learn the central banking system as dominated by the Bank
of England.

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Although the Rothschilds were technically rivals of the Peabody/
Morgan firm, rumor had it that they had formed a secret alliance.
Nathan Rothschild was not well liked, in part because of religious
prejudice. Morgan biographer George Wheeler wrote in 1973, “Part
of the reality of the day was an ugly resurgence of anti-Semitism. . . .
Someone was needed as a cover.” August Belmont (born Schoenberg)
had played that role for Morgan during the Civil War; but when the
Belmont/Rothschild connection became common knowledge, the ploy
no longer worked. Wheeler wrote, “Who better than J. Pierpont Mor-
gan, a solid, Protestant exemplar of capitalism able to trace his family
back to pre-Revolutionary times?” That could explain why, in the
periodic financial crises of the Gilded Age, Morgan™s bank always came
out on top. In the bank panics of 1873, 1884, 1893, and 1907, while
other banks were going under, Morgan™s bank always managed to
come up with the funds to survive and thrive.10

The Shadow Government

In 1879, Rockefeller turned his company Standard Oil into the
new vehicle called a “trust” in order to coordinate all of its produc-
tion, refining, transportation, and distribution activities. The Rockefeller
trust consisted of a network of companies that were wholly or par-
tially owned by Rockefeller and that invested in each other. The
scheme worked until 1882, when Standard Oil was driven out of Ohio
due to antitrust investigations. In 1883, Rockefeller™s trust moved to
New York, where it proceeded to systematically devour independent
oil producers and refiners across the country and the world. It was
aided in these rapacious practices by illegal railroad rebates from Mor-
gan, who had bought up the railroads with funding from the
Rothschild bank. Independent oil refiners, being unable to compete,
were forced to sell out at a huge loss or face financial ruin.
By 1890, Rockefeller owned all of the independent oil refiners in
the country and had a monopoly on worldwide oil sales. In 1911, the
U.S. Supreme Court ruled that the Standard Oil cartel was a “danger-
ous conspiracy” that must be broken up “for the safety of the Repub-
lic.” (“Conspiracy” is a legal term meaning an agreement between
two or more persons to commit a crime or accomplish a legal purpose
through illegal action.) In 1914, Standard Oil was referred to in the
Congressional Record as the “shadow government.”11 Following the
Court™s antitrust order, the Standard Oil monolith was split into 38

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Chapter 12 - Talking Heads and Invisible Hands

new companies, including Exxon, Mobil, Amoco, Chevron, and Arco;
but Rockefeller secretly continued to control them by owning a voting

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