By Richard (Rick) Mills, Ahead of the Herd

As a general rule, the most successful man in life is the man who has the best information

Mayer Amschel Bauer Rothschild, founder of the International Banking House of Rothschild said:

“Let me issue and control a nation’s money and I care not who writes the laws.”

The Rothschild brothers, already laying the foundation for the Federal Reserve Act, wrote the following to New York associates in 1863:

“The few who understand the system will either be so interested in its profits or be so dependent upon its favours that there will be no opposition from that class, while on the other hand, the great body of people, mentally incapable of comprehending the tremendous advantage that capital derives from the system, will bear its burdens without complaint, and perhaps without even suspecting that the system is inimical to their interests.”

In 1906, Senator Nelson Aldrich – known as the “General Manager of the Nation” because of his impact on national politics and position on the Senate Finance Committee – sold his interest in the Rhode Island street railway system to the New York, New Haven and Hartford Railroad, whose president was J. P. Morgan’s loyal ally, Charles Sanger Mellen.

By 1906 the annual rate of US capital formation was running at $5 billion. This rapid expansion went hand in hand with the creation of enormous industrial and financial monopolies. By 1904, more than 1,800 companies had been consolidated into 93 corporations, a financial consolidation led by J Pierpont Morgan.

A few historians believe that J.P. Morgan published rumors that the Knickerbocker Trust Company (in the ten years up to 1907, trust companies had increased three and a half times, to $1.4bn, compared with state banks, which had doubled to $1.8bn. The Knickerbocker Trust was the third largest Trust in New York with $65mn in deposits and 18,000 depositors – Robert F Bruner and Sean D Carr, The panic of 1907 ) was insolvent, the widely spread rumors were followed by the *National Bank of Commerce announcing it would stop accepting checks for the Trust Company which triggered a run of depositors demanding their funds back – thus precipitating the Panic of 1907.

* The National Bank of Commerce was the principal correspondent bank for bank clearings in the area southwest of Chicago and St. Louis. Because of this role, Commerce was at one point among the 20 largest banks in the United States, as measured by assets. Wikipedia

The Knickerbocker’s collapse caused banks and trust companies to hoard their funds. No loans were made, stocks slumped to their lowest level since December 1900 (the stock market fell 50%) and the crisis spread to the Trust Company of America.

In the Wednesday, October 23, edition of the New York Times was a headline describing the Trust Company of America, the second largest trust company in New York City, as the current “sore point” in the panic. JP Morgan summoned the Secretary of the US Treasury, George B Cortelyou, to New York. On being assured that the Trust Company of America was solvent with Federal backing, JP Morgan gathered together the presidents of all the key banks and organized an immediate $3 million loan to Trust Company.

J Pierpont Morgan had made his reputation and that of his bank. At this time Morgan started to slowly disengage from the day to day activities of his firm preferring to concentrate on his passion for touring Europe, collecting art and literature and sitting on the boards of charitable organizations.

“All this trouble could be averted if we appointed a committee of six or seven public-spirited men like J.P. Morgan to handle the affairs of our country.” Woodrow Wilson talking about The Troubles of 1907

The Panic of 1907 led to the passage of the Aldrich–Vreeland Act in 1908, this act established the National Monetary Commission – sponsored and headed by Senator Aldrich.

Aldrich also co-authored the Payne-Aldrich Tariff Act of 1909 which removed restrictive import duties on fine art. This enabled Americans to bring in very expensive European artworks that became the foundation of many leading museums.

On the night of November 22, 1910 a delegation of the nation’s leading financiers, led by Senator Nelson Aldrich, left New Jersey for a very secret ten day meeting on Jekyll Island, Georgia.

Aldrich had previously led the members of the National Monetary Commission on a two year banking tour of Europe. He had yet to write a report regarding the trip, nor had he yet offered any plans for banking reforms.

“Despite my views about the value to society of greater publicity for the affairs of corporations, there was an occasion near the close of 1910, when I was as secretive, indeed, as furtive, as any conspirator. . . . Since it would have been fatal to Senator Aldrich’s plan to have it known that he was calling on anybody from Wall Street to help him in preparing his bill, precautions were taken that would have delighted the heart of James Stillman.” Frank Vanderlip, the Saturday Evening Post, February 9, 1935

Accompanying Senator Aldrich to Jekyll Island were:

• Frank Vanderlip, president of the National City Bank of New York, associated with the Rockefellers

• Henry P. Davison, senior partner of J.P. Morgan Company, regarded as Morgan’s personal emissary

• Charles D. Norton, president of the Morgan dominated First National Bank of New York

• Col. Edward House, who would later become President Woodrow Wilson’s closest adviser and founder of the Council on Foreign Relations

• Benjamin Strong, a lieutenant of J.P. Morgan

• Paul Warburg, a recent immigrant from Germany who had joined the banking house of Kuhn, Loeb and Company, New York directed the proceedings and wrote the primary features of what would be called the Aldrich Plan. Warburg would later write that “The matter of a uniform discount rate (interest rate) was discussed and settled at Jekyll Island”

After the Jekyll Island visit the National Monetary Commission “wrote” the Aldrich Plan which formed the basis for the Federal Reserve system.

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