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majority of their stock.
The invention of the automobile and the gasoline engine gave the
Rockefeller/Morgan syndicate a virtual stranglehold on the energy
business. Rather than conserving oil and finding alternatives to the
inefficient gasoline engine, they encouraged waste and consumption
and ruthlessly suppressed competition.12 International strategist Henry
Kissinger would say much later that whoever controlled oil controlled
the world. That was true so long as the world was powered by oil,
and the oil cartel evidently intended to keep it that way. Early in the
twentieth century, energy genius Nikola Tesla was reportedly on the
verge of developing “free energy” that would be independent of both
fossil fuels and wires.13 But Tesla had the ill fortune of being funded
by J. P. Morgan. When Morgan learned that there would be no way
to charge for the new energy, he cut off Tesla™s funding and took steps
to insure the latter™s financial ruin. Tesla wrote in a plaintive letter to
Morgan, “I came to you with the greatest invention of all times. I
knew you would refuse . . . . What chance have I to land the biggest
Wall Street monster with the soul™s spider thread?”14




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Chapter 13
WITCHES™ COVEN:
THE JEKYLL ISLAND AFFAIR AND
THE FEDERAL RESERVE
ACT OF 1913


“One of my greatest fears was the Witches, for while I had no
magical powers at all I soon found out that the Witches were really able
to do wonderful things.”
“ The Wonderful Wizard of Oz,
“The Discovery of Oz the Terrible”




I f the Wall Street bankers were the Wicked Witches of the
Gilded Age, the coven where they conjured up their grandest of
schemes was on Jekyll Island, a property off the coast of Georgia owned
by J. P. Morgan. The coven was hosted in 1910 by Senator Nelson
Aldrich of Rhode Island, a business associate of Morgan and the father-
in-law of John D. Rockefeller Jr. The Republican “whip” in the Senate,
Aldrich was known as the Wall Street Senator, a spokesman for big
business and banking.
Although Aldrich hosted the meeting, credit for masterminding it
is attributed to a German immigrant named Paul Warburg, who was
a partner of Kuhn, Loeb, the Rothschild™s main American banking
operation after the Civil War. Other attendees included Benjamin
Strong, then head of Morgan™s Bankers Trust Company; two other
heads of Morgan banks; the Assistant Secretary of the U.S. Treasury;
and Frank Vanderlip, president of the National City Bank of New
York, then the most powerful New York bank (now called Citibank),
which represented William Rockefeller and Kuhn, Loeb. Morgan was
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the chief driver behind the plan, and the Morgan and Rockefeller
factions had long been arch-rivals; but they had come together in this
secret rendezvous to devise a banking scheme that would benefit them
both. Vanderlip wrote later of the meeting:
We were instructed to come one at a time and as unobtrusively
as possible to the railroad terminal . . . where Senator Aldrich™s
private car would be in readiness. . . . Discovery, we knew, simply
must not happen. . . . If it were to be exposed publicly that our
particular group had written a banking bill, that bill would have
no chance whatever of passage by Congress . . . [A]lthough the
Aldrich Federal Reserve plan was defeated its essential points
were contained in the plan that was finally adopted.1
Congressional opposition to the plan was led by William Jennings
Bryan and Charles Lindbergh Sr., who were strongly against any bill
suggesting a central bank or control by Wall Street money. It took a
major bank panic to prompt Congress even to consider such a bill.
The panic of 1907 was triggered by rumors that the Knickerbocker
Bank and the Trust Company of America were about to become
insolvent. Later evidence pointed to the House of Morgan as the source
of the rumors. The public, believing the rumors, proceeded to make
them come true by staging a run on the banks. Morgan then nobly
helped to avert the panic by importing $100 million worth of gold
from Europe to stop the bank run. The mesmerized public came to
believe that the country needed a central banking system to stop future
panics.2 Robert Owens, a co-author of the Federal Reserve Act, later
testified before Congress that the banking industry had conspired to
create such financial panics in order to rouse the people to demand
“reforms” that served the interests of the financiers.3 Congressman
Lindbergh charged:
The Money Trust caused the 1907 panic . . . . [T]hose not favorable
to the Money Trust could be squeezed out of business and the
people frightened into demanding changes in the banking and
currency laws which the Money Trust would frame.4
The 1907 panic prompted the congressional inquiry headed by
Senator Aldrich, and the clandestine Jekyll Island meeting followed.
The result was a bill called the Aldrich Plan, but the alert opposition
saw through it and soundly defeated it. Bryan said he would not
support any bill that resulted in private money being issued by private
banks. Federal Reserve Notes must be Treasury currency, issued and


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guaranteed by the government; and the governing body must be
appointed by the President and approved by the Senate.

Morgan™s Man in the White House

Morgan had another problem besides the opposition in Congress.
He needed a President willing to sign his bill. William Howard Taft,
the President in 1910, was not a Morgan man. McKinley had been
succeeded by his Vice President Teddy Roosevelt, who was in the Mor-
gan camp and had been responsible for breaking up Rockefeller™s Stan-
dard Oil. Taft, who followed Roosevelt, was a Republican from
Rockefeller™s state of Ohio. He took vengeance on Morgan by filing
antitrust suits to break up the two leading Morgan trusts, Interna-
tional Harvester and United States Steel. Taft was a shoo-in for re-
election in 1912. To break his hold on the Presidency, Morgan deliber-
ately created a new party, the Progressive or Bull Moose Party, and
brought Teddy Roosevelt out of retirement to run as its candidate.
Roosevelt took enough votes away from Taft to allow Morgan to get
his real candidate, Woodrow Wilson, elected on the Democratic ticket
in 1912. Roosevelt walked away realizing he had been duped, and
the Progressive Party was liquidated soon afterwards. Wilson was
surrounded by Morgan men, including “Colonel” Edward Mandell
House, who had his own rooms at the White House. Wilson called
House his “alter ego.”5
To get their bill passed, the Morgan faction changed its name from
the Aldrich Bill to the Federal Reserve Act and brought it three days
before Christmas, when Congress was preoccupied with departure
for the holidays. The bill was so obscurely worded that no one really
understood its provisions. The Aldrich team knew it would not pass
without Bryan™s support, so in a spirit of apparent compromise, they
made a show of acquiescing to his demands. He said happily, “The
right of the government to issue money is not surrendered to the banks;
the control over the money so issued is not relinquished by the
government . . . .” So he thought; but while the national money supply
would be printed by the U.S. Bureau of Engraving and Printing, it
would be issued as an obligation or debt of the government, a debt
owed back to the private Federal Reserve with interest. And while
Congress and the President would have some input in appointing the
Federal Reserve Board, the Board would work behind closed doors


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with the regional bankers, without Congressional oversight or control.6
The bill passed on December 22, 1913, and President Wilson signed
it into law the next day. Later he regretted what he had done. He is
reported to have said before he died, “I have unwittingly ruined my
country.” Bryan was also disillusioned and soon resigned as Secre-
tary of State, in protest over President Wilson™s involvement in Europe™s
war following the suspect sinking of the Lusitania.
The first chairmanship of the Federal Reserve was offered to Paul
Warburg, but he declined. Instead he became vice chairman, a posi-
tion he held until the end of World War I, when he relinquished it to
avoid an apparent conflict of interest. He would have had to negoti-
ate with his brother Max Warburg, who was then financial advisor to
the Kaiser and Director of the Reichsbank, Germany™s private central
bank. 7

The Incantations of Fedspeak

The Federal Reserve Act of 1913 was a major coup for the
international bankers. They had battled for more than a century to
establish a private central bank with the exclusive right to “monetize”
the government™s debt (that is, to print their own money and exchange
it for government securities or I.O.U.s). The Act™s preamble said that
its purposes were “to provide for the establishment of Federal Reserve
Banks, to furnish an elastic currency, to afford a means of rediscounting
commercial paper, to establish a more effective supervision of banking
in the United States, and for other purposes.” It was the beginning of
Fedspeak, abstract economic language that shrouded the issues in
obscurity. “Elastic currency” is credit that can be expanded at will by
the banks. “Rediscounting” is a technique by which banks are allowed
to magically multiply funds by re-lending them without waiting for
outstanding loans to mature. In plain English, the Federal Reserve
Act authorized a private central bank to create money out of nothing,
lend it to the government at interest, and control the national money
supply, expanding or contracting it at will. Representative Lindbergh
called the Act “the worst legislative crime of the ages.” He warned:
[The Federal Reserve Board] can cause the pendulum of a
rising and falling market to swing gently back and forth by slight
changes in the discount rate, or cause violent fluctuations by
greater rate variation, and in either case it will possess inside
information as to financial conditions and advance knowledge
of the coming change, either up or down.

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This is the strangest, most dangerous advantage ever placed
in the hands of a special privilege class by any Government that
ever existed. . . . The financial system has been turned over to . . . a
purely profiteering group. The system is private, conducted for the
sole purpose of obtaining the greatest possible profits from the use of
other people™s money.
In 1934, in the throes of the Great Depression, Representative Louis
McFadden would go further, stating on the Congressional record:
Some people think that the Federal Reserve Banks are United
States Government institutions. They are private monopolies which
prey upon the people of these United States for the benefit of themselves
and their foreign customers; foreign and domestic speculators and
swindlers; and rich and predatory money lenders. In that dark crew
of financial pirates there are those who would cut a man™s throat
to get a dollar out of his pocket; there are those who send money
into states to buy votes to control our legislatures; there are those
who maintain International propaganda for the purpose of
deceiving us into granting of new concessions which will permit
them to cover up their past misdeeds and set again in motion
their gigantic train of crime.
These twelve private credit monopolies were deceitfully and
disloyally foisted upon this Country by the bankers who came here
from Europe and repaid us our hospitality by undermining our
American institutions.8

Who Owns the Federal Reserve?

The “Federal” Reserve is actually an independent, privately-owned
corporation.9 It consists of twelve regional Federal Reserve banks
owned by many commercial member banks. The amount of Federal
Reserve stock held by each member bank is proportional to its size.
The Federal Reserve Bank of New York holds the majority of shares in
the Federal Reserve System (53 percent). The largest shareholders of
the Federal Reserve Bank of New York are the largest commercial banks
in the district of New York.
In 1997, the New York Federal Reserve reported that its three
largest member banks were Chase Manhattan Bank, Citibank, and
Morgan Guaranty Trust Company. In 2000, JP Morgan and Chase
Manhattan merged to become JPMorgan Chase Co., a bank holding

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company with combined assets of $668 billion. That made it the third
largest bank holding company in the country, after Citigroup (at $791
billion) and Bank of America (at $679 billion). Bank of America was
founded in California in 1904 and remains concentrated in the western
and southwestern states. Citigroup is the cornerstone of the Rockefeller
empire.
In January 2004, JPMorgan Chase & Co. undertook one of the
largest bank mergers in history, when it acquired BankOne for $58
billion. The result was to make this Morgan-empire bank the second-
largest U.S. bank, both in terms of assets ($1.1 trillion to Citigroup™s
nearly $1.2 trillion) and deposits ($490 billion to Bank of America™s
$552 billion). JPMorgan Chase now issues the most Visas and
MasterCards of any bank nationwide and holds the largest share of
U.S. credit card balances. In 2003, credit cards surpassed cash and
checks as a medium of exchange used in stores.10 Thus Citibank and
JPMorgan Chase Co., the financial cornerstones of the Rockefeller and
Morgan empires, are not only the two largest banks in the United
States but are the two largest shareholders of the New York Federal
Reserve, the branch of the Fed holding a majority of the shares in the
Federal Reserve system. The Federal Reserve evidently remains squarely
under the control of the Robber Barons who devised it.
The central Federal Reserve Board in Washington was set up to
include the Treasury Secretary and Comptroller of the Currency, both
U.S. government officials; but the Board had little control over the 12
regional Federal Reserve Banks, which set most of their own policy.
They followed the lead of the New York Federal Reserve Bank, where
the Fed™s real power was concentrated. Benjamin Strong, one of the
Jekyll Island attendees, became the first president of the New York
Federal Reserve. Strong had close ties to the financial powers of Lon-
don and owed his career to the favor of the Morgan bank.11

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