Cartelization of Banking: The Fed

0:00and the result was the election of Woodrow Wilson, a Democrat, for the first time since Cleveland and the Democratic Party all of a sudden gets in because the Republican Party was split wide open with the Morgans deliberately destroying Taft and Rockefeller, Rockefeller person, Taft paving the way for Wilson himself, who was also a Morgan person and when Taft got in, Taft, as I say, was the heir apparent of Teddy Roosevelt and first he'd get in as a successor, he'd keep the same people more or less for a while So his anti-Morgan policy didn't show up for a while. He had a Morgan guy secretary of state, Philander Knox, who was really a Mellon person, but Mellon from Pittsburgh, but Mellons and Morgans were of course allied. He had a Morgan guy secretary of the Treasury, who was on the board of mutual life insurance company, which has always been Morgan, at least was for a long time, probably still is.

0:53But, but, as Attorney General, before he filed antitrust suits, he had a guy named George W. Wickersham, who was a Wall Street lawyer. And he hasn't been studying much, not too much is known about Wickersham. But we do know he was on the board of a New York Wall Street lawyer. He was on the board of directors of the Interboro Metropolitan Company, which is a big transit holding company. Along with him on the board were August Belmont and Rothschild, agent, and a Guggenheim. We get to Solomon Guggenheim.

1:38So my suspicion is that Wittgenheim was essentially a tool of Guggenheim interests. We now come to the point where the Guggenheim family has been highly underwritten about, understudied, a very important family that gets prominent around the late 19th, early 20th century. The Guggenheim family was especially discovered copper, and there was a German-Jewish peddler, I think, Meyer Guggenheim, the original one, and went to the West and discovered copper. And anyway, they wound up, he and his, I think Daniel Guggenheim was sort of the patriarch of the second generation. They really owned all the copper in the United States. Every copper company was originally a Guggenheim company.

2:24These American Smelting and Refining, Kennecon and Anaconda, the three top copper companies were originally Guggenheim-owned. They were extremely wealthy, and yet nobody talked much about them. They hadn't been written much about. They didn't have a flair of the Lehman Brothers or Kuhn-Loh of the time. is extremely important and under-written, under-scholarly, under-studied, very important in really controlling the Wilson administration in many ways, along with Morgan, so an independent group, and we'll see when we get a little bit later on, essentially the control of Bernard Baruch, the absolute czar of World War I, the economic czar, and not only was Leon Baruchas, the head of the War Production Board, totally running the whole economy of World War I, he was a beloved figure, ran everything, a top presidential advisor until about the late 1940s, in other words, for 30 years, this guy was really running the whole country, more or less, regardless of the political party of the president, in other words, he was a democrat, And he was a powerful advisor to Hoover and to everybody else, and it was everybody, Eisenhower.

3:39As a matter of fact, when Eisenhower became president in Fall of 52, the first thing he did was give a dinner in honor of Bernard Baruch. And he said, everything I owe, I am that I owe to Mr. Baruch. It turns out that he was a major at West Point in the 40s, 30s. He was part of the Baruch study group. At the time he was just a major and nobody knew anything about. So, I think he was literally true, in other words, I think Eisenhower was essentially a Baruch creation, along with the Morgans and other Wall Street people. So here's Baruch, and not only was he a very strange phenomenon, Baruch, because he suddenly, he was unknown, more or less, until World War I, when I say he becomes the economic czar out of the War Production Board, with absolute collectivist control over the economy, running production and prices and everything else, in collaboration with big business groups.

4:30I haven't gotten to World War I yet, but since I'm on Guggenheim, I'm anticipating a little bit. The question that always entered my mind when I was growing up was, here's this guy who was running everything, he was the advisor to every president. Why did he get that powerful? Who the hell was he anyway? And the usual answer of orthodox historians is, well, he made a million dollars on the stock market. Well, okay, lots of people make a million dollars on the stock market. They don't become total czars of the economy and totally beloved by everybody. In other words, it was considered impossible for anybody to criticize Baruch. In the press, he was above criticism. He would make idiotic pronouncements on a park bench in the New York Times for every word. He would sit on a park bench in Central Park. Those days, of course, you didn't get a muggle all the time in Central Park. He'd sit on a park bench and issue pronouncements, and he'd make these idiotic statements.

5:16He'd write books, his autobiography, for example, was a totally worthless autobiography. What he'd say in there is, my advice to every young man trying to make a million dollars in the stock market is, He said it was very serious because it would pump us ass. He'd say, my advice is buy when the stocks are cheap and sell them when they're high. Great advice. Any moron knows that. The question is, when are they going to be cheap and when are they going to be high? He didn't tell us that. Anyway, how did he get so beloved? How did he get so, how did he hold him to power? And why did he stay? He virtually ran a new deal in many ways. He organized a farm block, a whole farm price support program, essentially Baruch creation. He seated people in the government. He was always a mentor of various people and got them into power.

6:03He really ran the NRA and the AAA through his agents. So the question is, why was he so powerful? Why was he about criticism? And the answer only came out, first of all, there was no biography of Baruch. He wouldn't give his papers to anybody. He wouldn't allow anybody to have them. He finally got a Margaret Coyte wrote a biography. It was fairly worthless. is finally a good biography after all this time. A few years ago there appeared a biography by Jonathan Schwartz called Mr. Speculator. Speculator, the story of Bernard Rook. Excellent biography, really has a lot of stuff in there, more than he realizes in a sense. It's pretty clear from his biography, the Speculator came out a few years ago. It's pretty clear from He was a lousy stock market speculator. He lost money every time he invested on the stock market.

6:56For one thing, he was a big railroad fan and he would invest in railroads heavily. He started investing in railroads after 1900 when railroads entered a big secular decline. In other words, he started heavily investing in railroads just about the time railroads were punking out as an investment. He was a lousy investor. How did he make a lot of money and how did he become the big shot? Big Shot, well, he turned out to be a friend and a disciple, a mentee, protege of the Guggenheims, in other words, his father, Dr. Simon Baru, was a Georgia physician, migrated to New York City around 1900, 1890 whatever it was, and became a Big Shot physician, a Park Avenue physician, so to speak, and one of his clients, one of his patients was Daniel Guggenheim, the mentor of Solomon, The patriarch of the family at the time, and since the Guggenheims liked him, the Guggenheims were immensely wealthy and they took him under their, seemed like a bright young man, took

7:55him under their wing and gave him the first job at a stock on Wall Street, etc. And he became sort of a running fan of the Guggenheims and they would tell him when to invest, we're going to invest in such and such a stock, and he'd invest along with them. Whenever he did that, he made a lot of money. When he invested on his own, he lost money. That was the key to his stock market assessment, following the Guggenheims and being their Potagy and General Angeron. So essentially, Baruch was equal Guggenheim. In other words, around Baruch, you can say, for reference, as Guggenheim, which accounts for his bolting to fame. As we'll see in a minute, Woodrow Wilson was essentially a Guggenheim Morgan person. And Cleveland Dodge, most of the major industrial mentor, head of the Phelps Dodge Company, which was a copper, involved in copper, and the whole Guggenheim, The Related Ally with Guggenheim There's a very revealing thing in the best biography of Herbert Hoover

8:53one of the best ones by David Berner I just mentioned this in passing, it's like a throwaway line, they said Hoover was invited to become Secretary of Commerce by Daniel Guggenheim and he turned it down I stopped, immediately I stopped, you have to be alive for a situation, what is this? Why does Guggenheim have the power to offer somebody Secretary of Commerce a cabinet post? Who the hell is Guggenheim? It's obvious that Guggenheim has a great power in this administration. It's also obvious that it must have been the Wilson administration because there's no other relevant one. Hoover was secretary of commerce during the 1920s and became president after that. So it must have been the Wilson administration, and therefore it's pretty clear that Guggenheim has a great power, obviously through Baruch and also Cleveland Dodge, who's a full pal of Wilsons.

9:39Anyway, I'll get to that in a minute, but I'm just demonstrating that Guggenheim has a great power. My suspicion is that Wickersham is basically a Guggenheim tool, and it was Wickersham who, at Taft's behest, started around the second two years of his administration, around 1980, around 1910, Taft starts filing, through Wickersham, anti-trust suits against international harvester and U.S. steel, or Morgan Trust, in other words, plus I think Allied, Alice Chalmers, another Morgan company. Anyway, in other words, we start finding a lot of antitrust suits, so Taft is going to only be interpreted as saying, here's what happened, remember during the Teddy Roosevelt administration we have a savage attempt by the Morganists to smash Rockefeller.

10:26William Howard Taft, an Ohio Republican, therefore basically in with the Rockefellers, uses Wickersham, I forget, settles in there in 1910, uses Wickersham, Attorney General, to file a whole bunch of antifrust suits against Morgan's company to try to break them up. They fail, the Supreme Court threw them out eventually, but the point is, for several years here, for at least the last two years of the Taft administration, there's a constant tax on the Morgan Trusts. Other guys I can mention, the Supreme Court Judge, whom TAF makes appoints as member of the Supreme Court with Charles Evans Hughes, who had been with New York, former Governor of New York, who was a lawyer for the Spanish law company in New Jersey.

11:17So, later in the new deal period becomes the Chief Justice of the Supreme Court, Rockefeller person. So, with TAF coming in, we have a retaliatory thrust, retaliatory strike, and attempt to break up Morgan, sold on Morgan using, in other words, the Sherman Act. So it has, from 1990 to 1900, the Sherman Act is a dead letter, not being used, nobody cares about it. Then, in 1901 or 2002, whenever it occurred, Teddy Roosevelt brings the Sherman Act out of the closet, uses it as a club to smash Standard Oil on behalf of the Morgans. And then when Taff gets in, he starts using the antitrust law as a retaliatory club against the Morgans on behalf of the Rockefellers. So as this happened, the Morgans, the very powerful Morgans, we act very, very badly on this thing.

12:07They're very bitter, very PO at this. Not supposed to do this to the Morgans. And so the Morgans create a whole new party, third party, the Progressive Party, Created out of thin air in 1912, the object of which was a story tasked, tasked of course gets the renomination to the incumbent president. So they create a new party called the Progressive Party, the secretary treasurer, the head of the executive committee I think it's called, but guess who, George W. Perkins, Morgan partner, who's also been called secretary of state for the Morgan Empire. The Perkins sets up the Progressive Party, brings Teddy Roosevelt out of the closet instead Teddy Roosevelt was off in Africa on safari usually in these two years. Teddy Roosevelt was all upset that Taff was attacking Morgan.

12:55By the way, he says this openly. He says, terrible thing, he's broken my agreement with Morgan's. My agreement never to use antitrust against them. Morgan's a good trust and here Taff's daring to break with me and so forth and so on. Teddy Roosevelt comes in a comeback, comes back out of retirement and runs for another term, a third term, in 1912, on a progressive party label. Interestingly enough, here's the progressive party. Their platform is very progressive in the sense that they're very corporatist. All the planks of the National Civic Federation, the idea of government, total regulation of industry, eliminating laissez-faire. For example, they call for strong national regulation of corporations. Preferably having corporations incorporated by the federal government.

13:44Anyway, here's what they say. We demand a federal commission, such as the Interstate Commerce Commission, once again that's being repeated, to attack, quote, unfair competition, unquote, and force capitalization, quote, unquote. And what does it mean? In other words, we need a government bureau to regulate competition, regulate all of industry, rather, like the ICC, to eliminate unfair competition. What is unfair competition? It's a code word that means competition. Unfair competition means competition. It means we have to get rid of competition and have restricted cartelization. Unfair means they're cutting prices. That's what it means. Forced capitalization, what does that mean? It means too much capitalization. It means to restrict the amount of capital going into industry. In other words, to cut production. It's, again, another way of talking about cartelization.

14:30Again, quoting from the Progressive Party platform. Again, they call it compulsory publicity, an old theme we've been mentioning before that just eliminates secret price-cutting. And they said, quote, the Progressive Party platform in 1912, he got more votes than Pat. It became a powerful party for that moment. They scuttled it after the election. Quote, thus the businessman will have certain knowledge of the law, the investor will find security for his capital. What does that mean? It means he will restrict the competition. That's why they'll find security. Dividends will be rendered more certain. On a such a system of constructive regulation, quoting still, legitimate business freed from confusion, uncertainty and further litigation will develop normally, unquote.

15:17In other words, what they say in polite language is that we will stabilize the industry, we will cartelize it, there won't be any more competition, there won't be any confusion, uncertainty, we will make the world more secure for businessmen by cartelizing it. The progressive party goes on to cite Germany, Bismarck-type Germany, as the ideal example, a model to follow. For in Germany, quote, this is not to let these guys from favoring war with Germany, of course, in a couple of two years, but anyway, they cite Germany for their basic policies. In Germany, quote, their policy of cooperation between government and business has, in a comparatively few years, made them a leading competitor for the commerce of the world. And again, quote, the time has come when the federal government should cooperate with manufacturers and producers in extending our foreign commerce, unquote.

16:05by the way, you'll find out about, the only way you'll ever find out about what's going on in politics is when, during campaigns, when each party really reveals some of the dirt on the other, on the opposition, both parties usually write, so, at any rate, the, Wilson, of course, also came out for government regulation of reasonable competition and reasonable combinations and all the rest of it, they all now agreed, where Professor Jeremiah Jenckson, After the election was over, economist Cornel, one of the prophets of this new economics, said, Now the campaign is over, we have to get on with the constructive work of stabilizing the system. So, now the progressive party was backed by almost all big businessmen, by a whole bunch of them.

16:5590% of the Union League club of Chicago, which is the all the top businessmen in Chicago, 90% backed Teddy Roosevelt in this three-cornered election. So it was Teddy Roosevelt and the Progressive Party, Taft and the Republican, and Woodrow Wilson, who I'll mention in a minute, and the Democrat. At any rate, the George W. Perkins, so 90% of the business, of the Union League Club of Chicago backing Teddy Roosevelt. Two-thirds of the leaders of the Progressive Party, two-thirds were big businessmen and big business lawyers, and the other third were professionals and educators. In other words, everybody in that party was urban, upper middle class or upper class, almost all wasps and almost all republicans or ex-republicans. So George W. Perkins really set up the party and Frank, another powerful person, it was Frank Muncie, who was a big newspaper publisher.

17:47He was heavily invested in Morgan companies and was associated with a Morgan, heavily invested in the U.S. Steel and International Harvester. So we have Muncie, who was a Morgan person, and Perkins, who was a Morgan partner, leading the drive for Teddy Roosevelt. Let's say two-thirds of the Progressive Party leadership were businessmen. And I think I mentioned the fact that the progressive party convention in 1912 was solidly a combination of morgans, pietists, social workers, Jane Addams, only people, technocrats, engineers, historians, economists, all the interventionists, all gathered there.

18:34and with him singing, him singing, dotting the whole speech. I think I mentioned this, when Teddy Roosevelt gave his keynote address, he deliberately used the Christian-Pliotist imagery. He went up in this famous peroration, he went up by saying, we stand in Armageddon and we battle for the Lord, and in between they shout Amen and so forth, and then they sang, Christian hymn, we shall follow, follow, follow, substituting Roosevelt for Jesus. So the whole thing was filled with pietist rhetoric and deliberate references to pietist hymns and imagery. They had a combination of all these guys. Morgans, big businessmen, technocrats, aggressives, social workers and pietists.

19:19The only big business people who were for task were Old Rich Rockefeller people, of course. Senator Old Rich and the Rockefellers. and Alan Hugh Root, who for some reason was, listen, Chad, I think he wanted to be president after all, he wanted to get the nomination somehow sort of PR for not making him president or whatever, so he personally peed, and Knox stuck with Taff, that's about it so in other words, the Progressive Party was organized in order to smash Taff, and I liked Wilson, and this was accomplished so then the question is, who was Wilson? Who were his backers? Where did he come from? Woodrow Wilson is not one of my favorite people, to say the least, in American history. I can't think of anybody I dislike more. Combine all the virtues we're talking about, he was a pietist, Southern Presbyterian, professor, Ph.D., a progressive historian, and a political scientist, and imbued with not only the idea of saving the soul by saving everybody else, but also saving the world,

20:27what was in the World War I. So, Christianizing the world as well as the country, so to speak. His major political, he was president of Princeton for several years and got a lot of trouble at Princeton. His major political mentor, until almost the day he was elected, when they had a mysterious split, was George Harvey, who was the head of Harper Brothers Publishing Company, and Harper's Weekly magazine. By 1906, when he was still president of Princeton, Harvey decided to groom him for president, and had a whole thing, a whole campaign, making him governor of New Jersey in 1910, and then getting him nominated in 1912. Harvey was a New York City executive, he became president of Harvard, he was also a business executive in general.

21:17He was closely connected with William C. Whitney and Thomas Fortune Ryan, New York, the Morgan-oriented faction magnate, and also Walter Oakman, who was a big Morgan type, should be mentioned here, was the president of Guaranteed Trust Company, Morgan's major bank, commercial bank. So, he's heavily, heavily hip-deep into Morgan. He's a close friend of Morgan, and in 1900, Morgan owned Harper's Weekly, and Hopper Brothers' publishing company. In 1900, it was in bad financial shape, and Morgan asked his old buddy Harvey to become president and take it over and run it, so Harvey and Morgan were very closely allied. So we have, in other words, Morgan pushing both Teddy Roosevelt and Wilson, and to say Harvey gets out of favor with Wilson until the end of the 1912, but basically it's still his political mentor until late 1912.

22:10Another thing that happens was a very peculiar thing about Wilson is that he meets, in 1911, 1912, he's beginning to run for office of president. This campaign is gearing up late 1911 and early 1912. He meets Colonel Edward Mandel House, a Texas businessman and politician. First of all, as a colonel, and he's always great to me, he's not really as a fake colonel as many Southerners are, he just gave himself the title of colonel. The House is a Texas politician, he likes to dabble in Texas politics, and, okay, Texas is an important state, but after all it's not the top state in the Union, and he meets Woodrow Wilson, he wants to be a President Maker, and lots of people like to be President Makers, and he says he's going to help Wilson get elected, okay, and then Wilson asks him, what would you like to do in my administration, The House says, I'd like to run your foreign policy, and Wolfson says, okay, and what kind of a thing is that?

23:20I mean, it seems to me a rational person reading this will stop and say, what in the hell is going on here? Meet some colonel from Texas, some fake colonel, and say, yes, yes, you could take over my foreign policy. It's very weird. There's no decent biography of the House, even today. In other words, very little study. His diaries were published by Professor Seymour Yale, but these are just his diaries. He didn't really do anything. There's one biography of him in his Texas years and another couple on the Versailles treaty, but there's no real biography of House. It's an amazing thing. There's 10,000 American historians, each of which have to get a PhD, so they have to write something, and nobody's done a biography of House. It's incredible. Here's a guy who was running the entire foreign policy of the Wilson administration, even though he had no office.

24:07And he never was a government official. He was just sitting in the White House all the time. He was an absolute master of foreign policy. The Secretary of State had no power. He was making appointments for Wilson. Almost all of Wilson's cabinet appointments were cleared through the House. The House advised him, you pick so-and-so for attorney general, pick so-and-so for postman general. And Wilson would listen to him, an abject tool of Colonel House. So who the hell was Colonel House to say he was a Texas politician? It makes it too weird. There have been all sorts of psychobabble studies of Wilson and House. Why is Wilson dominated by house? What was the Spangali-like power? House out of the Wilson. Freud, I think, wrote a study of Wilson and house. But none of this stuff, I mean, all of this stuff seems to me meaningless. There's no, there's no, there's no real, there's no, there's no demonstrable reason why Wilson should have been dominated by house.

24:58Wilson is a pretty tough character in someone's house. And so we have to look for houses with deeper connections here. Not only that, but it's now known that House, even though it's supposed to be a loyal tool of Wilson, that was his, I'll carry out all of your orders and master it, that sort of thing, he's constantly going behind Wilson's back in order to drag us into war on the side of England. In other words, he acted almost unofficially as a British agent. He would conspire with a British ambassador in the British Secret Service. If Wilson was a little bit reluctant to get into the war, as we say, we first will see he finally did, House would maneuver with a British, this loyal, behind Wilson's back to force him into it. It's a very strange situation, and the state is all some kind of psychobabble. It doesn't fit. So who was House? He wasn't just a Texas politician. He was first of all a multi-millionaire.

25:46His father was the third-largest, third-wealthiest person in Houston, Texas, at the moment. He had a lot of cotton land. He was a banker, and he was also a railroad owner. He owned the Trinity and Brazos Valley Railroad, an important railroad in Texas, in Texas, in which the colonel was the manager, and railroad, of course, means if you hear the word railroad, you immediately suspect Morgan by this time. Sure enough, this railroad was financed by the old colony trust company of Boston, Boston Financial Entrace, which were heavily involved with Morgan, and now have a Morgan connection. Also, House's daughter, Mary Gordon Alkencloss, of the famous Alkencloss family, from which Jackie Kennedy-O'Nassos Gordon Apacross was a partner, excuse me, a director of the Illinois Central Railroad, which was of course Morgan's.

26:43We have definite Morgan connections with the Colonel, and it's better if he sounds, of course, he's more amenable to the public, because in Texas nobody associated with Morgan as they would have L.A. Uruz, who was a Morgan lawyer. So here he comes in, he takes over the government as Wilson gets in. Who recommended House to Wilson anyway? How did he get in? He met him through Harvey. So we have a Harvey, the Morgan-Harvey House connection. In other words, Harvey says, talk to Colonel House, he's listening with his vice on the whole thing. Wilson himself, before he became president, was a... Before we get to the words themselves, there are other key advisers of Wilson, in addition to Colonel House and George Harvey, Cleveland Dodge, I already mentioned, was a post-Dodge copper magnate, in with Guggenheims and Morgans, and George Peabody, who was a New York City banker, and I've already mentioned this, Peabody came from an old Boston family.

27:49One of the Peabody family was a partner of Morgan's father, a partner way back in the mid-19th century, Junius Morgan Banker was a partner of the same bank as George Peabody as one of his ancestors, and another Peabody was the best man at J.P. Morgan's wedding. If you were not a high school chum of Morgan and Rockefeller, it would be a good thing to be the best man at his wedding. Anyway, we have a very strong, Peabody was definitely a Morgan person, Dodge was sort of Morgan Guggenheim, both, I would say, in that area, and House was probably Morgan, Harvey was Morgan, so here's Wilson is surrounded by Morgan people. Now, Wilson, before he becomes president, was on the board of directors of two companies, he was a scholar and all that stuff, he was also a member of the boards, he was a member of the board of the Carnegie Foundation, and also a member of the Board of Mutual Life Insurance Company, which is a Morgan company, Morgan's top life insurance company.

28:48So, here we see Woodrow Wilson, academic, Ph.D., the only Ph.D. who has ever become president, a total disaster, watch out for Ph.D.s running for office. Ph.D., professor and Morgan tool, and also in with the Guggenhans. So what was his cabinet when Wilson gets in? Let's say Wilson gets in, he squeaks in because Teddy Roosevelt split the Republican vote. And by the way, when Wilson was re-elected in 1916, he just beat out Charles Evans Hughes, the Rockefeller person for president, by a real squeaker. I mean, Republicans almost won, even though Wilson was still president. So what's the Wilson cabinet like? Well, he has to make William Jennings Bryan Secretary of State, and he has to do that, because Bryan is so loud.

29:38Bryan shifted from Cham Clark, who was a progressive Democrat from Missouri, from Missouri. The last ballader, throws his support to Wilson. This was obviously a deal that was made. Bryan gets to be Secretary of State. So Wilson had to do that. Bryan doesn't have much power as Secretary of State anyway. Anyway, House is running the whole thing from one of the unofficial Oval Office, so to speak. And he makes the Secretary of Treasury, which is more important for economic affairs. Secretary of Treasury, very interesting guy, William Gibbs McAdoo. Now McAdoo is from New York City and most historians said, well, he was sort of just a regular progressive or something, baloney. In 1922 was the president of the Hudson Manhattan Railroad, which used to run the tubes from New York to New Jersey, the Hudson tubes, it was originally called the Hudson and Manhattan Railroad, it was a very big railroad, a $120 million capitalization, which was very big in that period, one of the 12th largest companies or something like that in the country, it was in the top 100 anyway, top 100, fortune 100. So who was running the Hudson Manhattan Railroad? Well, the Hudson Manhattan Railroad

30:50McAdoo was president for many years. It almost went bankrupt around 1900. And to save it from bankruptcy, he turned to his buddy, J.P. Morgan, himself. And Morgan said, okay, my son, I will bail you out. In return for which, the entire court, the entire office, all the officers in the court, wherever, were Morgan people, top Morgan people. Vice Presidents, which this guy Oakland already mentioned, who was the president of Guaranteed Trust Company, which is the Morgan, the major Morgan commercial bank, Guaranteed Trust. Right now they have a Morgan Guaranteed, JP Morgan merged with Guaranteed Trust and it's now Morgan Guaranteed Trust. The other Vice President, Edward Converse, who was the president of Bankers Trust Company, which Morgan set up in 1900, 1901, to do the trust business, you know, the whole trust instruments, a modern instrument.

31:41The two vice presidents of Hussein and Hens, who were both top Morgan people, not just secondary Morgan people, but top people, Oakman and Converse, and other directors included Judge Gary, head of USTO, top Morgan person, Frederick Jennings, partner of Stetson, Jennings & Russell, the Top Morgan Law Firm, remember Francis Lynn Stetson Jennings was the partner of his, and so on down the line, a whole bunch of people, Vice President of Guaranteed Trust, the guy who was the brother-in-law of George Baker, head of the first bank in New York, the first national bank in New York, which was the Top Morgan Bank, along with Guaranteed Trust. So he had the whole thing, the whole, Murray Director was a top Morgan person. So when he becomes Secretary of Treasury, McAdoo very quickly cements his position by marrying the daughter of Woodrow Wilson.

32:41He becomes the son-in-law of Wilson. Later on, and during the war, he becomes the head of the Nationalized Railroad System. And he also becomes, by the way, in the 1920s, he almost becomes a Democratic nominee for president in 1924, The Ku Klux Klan ticket. This time he moved to Alabama and the Ku Klux Klan was all in favor of him. Why were they all in favor? Because he was a piousist. He was in favor of prohibition, they were crushing Catholics and all the rest of the stuff, which we now... The Ku Klux Klan, you have to realize, is not just anti-black and anti-Semitic, it was also anti-Catholic, a key thing in 1920. It was very powerful in 1920, not only in the South, but also in the North. In Oregon, Indiana, New Jersey, places like that, an anti-Catholic ticket, an anti-Catholic plank. That's one. So in 1924, that was funny because the run for Democratic Party nomination, skipping ahead here of course, but the 24th for Democratic ticket, we have McAdoo running as a Southern on the Ku Klux Klan ticket,

33:39progressive Morgan's Ku Klux Klan ticket, running against there's Alfred E. Smith, governor of New York, an Irish Roman Catholic, and the convention took place in New York City. All these Southern Baptists and Methodists are coming up thinking that the Jesuits are going to nice them at any moment from behind the Aurochs. So they're coming up. H.L. Mencken has a wonderful description of the convention. It was very hot. No air conditioning, I remember. It took them 104 ballots. It took them two or three weeks of voting. Imagine the hysteria here. It was very hot. 100 degree heat every day. with packed crowds and nobody can breathe in this thing, very hot, and a fantastic struggle between Southern piouses and Irish Catholics in New York.

34:26Neither of them gets it and the so-called compromise candidate wins in the last minute. The 104th ballot, now you're lucky if you go to two ballots for presidential nomination. On the 104th ballot, John W. Davis, the compromise candidate, who is going to be Davis? Morgan partner, Morgan lawyer, top lawyer from J.P. Morgan Company, candidate, so you're right. Leaping ahead, that's okay, it shows you how all these things have a continuity in this whole business. Everybody else, the whole cabinet is specially selected by Colonel House. McReynolds from Tennessee, the Attorney General, Franklin Lane from California, the Secretary of the Interior, he was a pro-shipper, the interesting thing about him is he was a San Francisco shipper.

35:18What's happening now, by the way, in the railroad industry is that shippers are beginning to take over the Interstate Commerce Commission. The railroads have been running it until about 1900, and as shippers, in other words, the people with low freight rates are beginning to take over. Franklin Lane was one of the people, had been a member of the ICC, and in other words, the ICC is now flipping out of railroad control into the control of the shippers, and so the ICC is beginning to look around for other ways of cartelizing the system. Postmaster General selected by Colonel House, Secretary of Navy selected by Colonel House, Secretary of Agriculture is also, Secretary of Agriculture is essentially David Houston, who was a Texas person, even though he came from Missouri, he was originally president of the University of Texas, president of Texas A&M, selected by Colonel House, and of course therefore in with House.

36:14The Secretary of Commerce was supposed to be a Rockefeller person. He was the trustee of William Redfield, the trustee of Equitable Life Insurance Company. He was the sort of Rockefeller, Rockefeller-ee. And the Secretary of Labor, which was a new post, had made a separate department, and I was a union official, the first union official, I would have been a cabinet member. William Ludwig of Pennsylvania had been Secretary of Treasury of the United Mine Workers, was nominated by Gompers. They asked Gompers to do it. He wouldn't do it. He collected. So that's the AFL post that they're laboring, shows a tie-in of the corporatism with laboring unions. The ambassador to Great Britain becomes very important in getting us into the war. Walter Hines Page was a Virginia newspaper man, old friend of Wilson and virtually a British agent, as if he were a British agent to put it that way.

37:05is a very wealthy and vice president of a double day company, his salary was especially paid for by Cleveland Dodges, a special subsidy, and no doubt in with a Morgan interest, he was also a tool to own a house and he was selected by a house once again, And so Hans and Page formed a team to get us into the war, so I'm skipping ahead a little bit essentially. World War I, I consider World War I the most important event of the 20th century, the most important political event, it's the term of everything ever since. Everything, everything that's happened in world affairs and foreign policy in 20th century is the result of World War I, the result of the whole, so we deal a little bit with that either today or next time. And as a matter of fact, in SS-104, The two major events of the Wilson administration, before the war that is, both happening in 1913, as soon as he gets in, he starts pushing these things.

38:20Two major things he does is he puts in an interstate commerce commission for industry, in other words, he finally achieves the agitation, achieves the goals set by the National Civic Corporation, all these guys for 14 years, he achieves a federal trade commission, puts it in in 1913, to do for industry what the ICC had done for Mayor Rose, what the Department of Agriculture had done for agriculture, etc. etc. The Federal Trade Commission has also changed the whole banking system by putting in a Federal Reserve system, nationalizing the banking system, creating a national engine for inflation supported by the federal government.

39:05Those were the two major events before the war in 1913, which Wilson immediately drives through. The Federal Trade Commission is driven for by all these people we've been talking about, all the Morgan types, all in actual civic federation. What they do is they outlaw unfair competition, have a Federal Trade Commission to regulate industry and all that. One of the main people who helped write the legislation, in other words, was actually Arthur Eddy, a big shot Chicago corporate lawyer, wrote a book called The New Competition in 1912 and many editions, five or six editions in the last few years.

39:58It's a very interesting book, I read this book, I got a whole lot of copies, and remember, he was one of the writers, the author of the Federal Trade Commission Act, and he said, the slogan, and he also was a specialist in creating trade associations, creating cartelizing devices in industry, which would set quotas, you know, increase prices and cut production, and he writes in this book, he says, the slogan on trade, At the top of the book, in other words, he starts off by writing a new competition. The slogan has a slogan. It says, competition is war and war is hell. That's the scene of his life. In other words, therefore, he can get rid of competition. And he says, we have to have more trade associations, more cartels.

40:44We have to repeal the Sherman Act, pass a federal licensing law, which would organize cartels directly, set up a federal trade commission toward that end, and enforce it. have the government enforce price agreements to keep prices up, production agreements to cut production This is of course what Mussolini did later, in other words after World War I, Mussolini adopts this policy fascist economic policy known as the corporate state which essentially adopts the Morgan Rockefeller type, Rothbard type corporatism and organize all the Italian industry into associations, creating unions that represent labor, workers, industry associations that represent industry and have the government enforce the whole thing and set up these agreements to regulate production and prices.

41:36and the Roman Catholic Church in the 1920s was quite friendly to this idea, I guess it would cure it and eliminate class conflict by having it culminate through corporatism to a corporate state. The Dolfus regime in Austria in the 1930s was essentially a fascist or corporate state concept in many countries in Eastern Europe and also of course the Nazi regime took over He says, for example, competition is selfish unless you are placed by cooperation. When he meant by cooperation, of course, it's cartels. Competition is a terrible thing. It destroys, destructs, destabilizes prices. Prices have a fall with competition.

42:22Stabilizing prices in other terms is a code word for keeping prices up. It's like Bush, by the way. Bush comes in and has a nerve to call for or tax cheaper oil. and Bush being as a Texas oil man, of course, his father was a Texas oil man, he comes from Connecticut, a preppy, he's a Texas oil man, so he's worried about the tiger oil, it's finally cheap at long last, the first time since 1972, so competition says that he's inhuman and erratic and so forth and so on, and he said, there's another great question, from Eddie. Competition free and unfettered is absolutely destructive to all stability of prices. Prices can't be kept up. Before the interstate commerce law, regulating railway rates competition reigned. To a certain extent, the railroads from time to time cooperated to control conditions by pools and associations, in a sense it was sort of summing up the terms so forth. But not until the government stepped in and called a halt to vicious competition, where railroads

43:32The rates regulated in any permanent manner are unclosed. So he's actually summing up what I've been talking about. In other words, here we have competition. Businesses that don't like competition, they turn to the government. They try to achieve monopoly prices or cartel prices in the free market. It doesn't work. They turn to the government, the federal government particularly, to do it for them in the name of something else, the name of democracy or whatever. So then he says we have to have legislation to do for general business with the ICC, just in the railroad. And he says he likes the, as far as the socialist goes, he likes the philosophical socialist writers, as he calls them, who are not Marxists, who are in favor of the trust as a forerunner of socialists. He likes that. It's good to have government-regulated trusts that can work with them.

44:17These are so-called right-wing socialists in this period, who are pro-state. The thing about the left-wing socialists, Marcus Leninists, they tend to oppose the government and all the existing governments. The right-wing socialists would work happily with the cooperative left-wing opposition, His Majesty's loyal opposition, they call them, Her Majesty's loyal opposition. So that's okay to have that, as long as you don't break up this happy, harmonious setup. The only class in the country that benefits from free competition, I like this as a marvelous statement, The only class in the country that benefits from free competition are the non-producers who have fixed income. Who are we talking about? We're talking about us. We're talking about consumers. We're talking about the people who benefit. People who benefit from love prices. Every one of us, the consumers.

45:07He says of the class small numbers. I question that. Anyway, after the Federal Trade Commission Act was passed in 1913, he writes several editions of his book. In 1915 he writes another edition, a fourth edition, and he says he hails the Federal Trade Commission as a good step forward because it outlaws unfair methods of competition. It's going to end cutthroat competition, it's another code word for competition. And also he says it's going to lead to resale price maintenance, a fair trade. It allows the government to set up minimum price regulations for industry, which is something he did for retail. They finally did it in 1930, the Robertson-Patman Act, which for a long time enforced legal price minima for products.

45:54In other words, if you charge less than $10 for a bottle of vitamins, you're declared illegal, things like that. The Supreme Court only declared this unconstitutional in about 1970 or late 60s or something. So for many years, about four decades, this sort of doctrine prevailed to benefit the organized retailers at the expense of the public. In other words, to cartelize the retail industry and keep prices up. It's called resale price maintenance. Great term. Terms are always pretty shrewd. So the Federal Trade Commission Act paves the way for that. It's the first step, resale price maintenance, and also to eliminate possible unfair competition.

46:44So almost all business groups, when the Federal Trade Commission was being passed, loved it. They said, this is great stuff, it's going to regulate industry, it's going to stabilize the system and so forth and so on. Two people, two lawyers, who played a very prominent role in setting up the Federal Trade Commission, Victor Morowitz, who was a Morgan lawyer, actions in the Pica and Santa Fe lawyer, and Francis Lynn Stuxum, I mentioned many times in this course, a powerful figure, and Morgan's pop attorney, attorney for J.P. Morgan and Company, J.P. Morgan personally, Cleveland's, Wilbur Cleveland's law partner, who pops up constantly in this whole period, Francis Lynn Stutz and Morgan's lawyer. They essentially wrote the, these two guys mainly wrote the Federal Trade Commission Act. Also helped by George W. Perkins, Morgan Partner, Morgan himself, Belmont Gompers, James W. Jencks, Cornell University professor, all these guys are in on this.

47:45Finally comes to fruition under Wilson. Also, when the FTC was passed, business groups hailed it, the Chicago Association of Commerce praised it, the National Chamber of Commerce. By the way, the U.S. Chamber of Commerce, interesting little fact, was created by President Taft just before he retired from office. In late 1912, he said, we need an organization And businessmen will speak for business. So essentially he promoted this and it came into being as a result of government encouragement. So the Chamber of Commerce, of course, loved this. New York State Chamber of Commerce loved it. The National Association of Manufacturers, which had traditionally been a laissez-faire after, was split. They were not sure. They were ambiguous on this.

48:33But everybody else, of course the National Civic Federation loved it. Chamber of Commerce loved it. The question is, we have to always assess the so-called Ralph Nader myth, that all these things were set up by progressive anti-business forces and then the businessmen took it over later. Who wrote it? We've already seen who wrote it, Marlott, Stetson, Eddy and these people. Who became members of the Federal Trade Commission? Five-man commission. Who's running it from the very beginning? Well, the key figure, the chairman, rather, was Joseph E. Davies, who was a young democratic leader, I think life insurance lawyer at Madison, Wisconsin, who punked out after a very short period of time.

49:19He really wasn't, he was more interested in foreign affairs, and he was interested very soon in getting us into war, and so he sort of more or less left the commission, he was sort of the figurehead. Joseph E. Davies had been head of the Bureau of Corporations, which we saw was the Teddy Roosevelt creation, the predecessor to the Federal Trade Commission, for the beginning of it, obviously sympathetic to this whole concept. Joseph Salerno, Walter Block, Joseph Salerno, Roger Garrison, Hans-Hermann Hoppe, Joseph Salerno, Walter Block, Lew Rockwell, Roger Garrison, Mises Institute, Human Action, Man Economy and State, The Theory of Money and Credit

50:14We have to realize that Thomas W. Lamont, Morgan's partner, a very powerful Morgan partner, later on, actually started this in World War I, II. It was pushing the idea that Russia was a great democratic country in World War II. He was not a communist, he was just a Morgan person. At any rate, the real head of the Federal Trade Commission was the Vice Chairman, as I say, Joe Davies quickly essentially became inactive. So the Vice Chairman had the key role, he was Edward Hurley, he was head of the Illinois Manufacturers Association, later became head of the Nationalized Railroads in World War I. He was the vice-chairman and he was the president of Illinois Manufacturing Association And really running the thing in the first few years He was the founder of the pneumatic tool industry, he was an important Chicago manufacturer So he gave a lot of very interesting speeches as he was running the thing And he was praised overwhelmingly by businessmen, he loved them in return

51:28So, for example, I'll give you a couple of good quotes from Hurley. He addressed the Association of National Advertisers in December of 1915. And he said, quote, Through a period of years, the government has been gradually extending its machinery of helpfulness. I like that. Machinery of helpfulness. Railroads and shippers, he said, have the ICC. It's the same theme with Eddie, and the old guys say more or less the same thing. President Shipper has had the ICC for many years, the Interstate Commerce Commission, the bankers have the Federal Reserve System, which we'll get to in a minute. The farmers have the Department of Agriculture. General business needs to have something done for them. So quote from Hurley, to do for general business that which these other agencies do for the groups to which I refer, none of these guys can write very well, anyway, to do for the groups to which I refer was the thought behind the creation of the Trade Commission.

52:22Wilson fully supported Hurley on this. Wilson would send messages to Hurley saying, you're doing a great job, I agree with what he was saying. Also, one of the things he would do is, Hoover did the same thing. Hurley would write a speech for Wilson praising Hurley. In other words, Hurley would write the speech saying, Ed Hurley is doing a great job, and Wilson would then deliver the speech. During World War I, Hoover did the same. He would write a speech for Wilson saying, Hoover is doing a great job. Anyway, if you want to get endorsed by the President, write the endorsement yourself. At least if you're Hurley or Hoover. He also addressed the National Industrial Conference Board, which is a group that still exists, of course, which is a group set up by business to bring statistical information to bear on government planning. And he said, it's kind of cute, he said this in July 16, he says, I don't know anything about the law. And that applies to the Clayton Act and the Federal Trade Commission Act, in other words, he doesn't know anything about the law which he was administering.

53:17In my position on the Federal Trade Commission, I'm there as a businessman. When I was offered a place, I told the President all I knew was business. I knew nothing about the new laws nor the old ones. And I would apply the force that I might have in the interest of business. I think that the businessman in this country will bear me out when I say that I try to work only in the interest of business. And nobody would make that kind of a flat statement nowadays when people are more public relations oriented. But here he's flat out, that's what he's doing. So big businessmen, they loved Hurley, they loved the Federal Trade Commission, they loved to be regulated. In other words, one of the themes of this course, one of the basic themes is that it's thought by most people, I think, that businessmen are always in favor of laissez-faire, always against government intervention. Ain't true. It certainly is not true in this whole period from 1900 on, from the late 19th century on.

54:07Quite the opposite. The drive of these business owners is to try to create government as a cartilaging device. The government would come in there, regulate, restrict, control, limit competition, and raise profits. So, Wilkinson himself was in favor of this kind of price-fixing thing. Wilkinson gave a speech also in 1916 where he said, The Federal Trade Commission has transformed the government of the United States from being an antagonist of business into being a friend of business. The only thing is, it had never really been an antagonist, at any rate. Other people on the Federal Trade Commission, the other three people, Davies and Hurley, George Rubly, who was a big shot in the Progressive Party in 1912, and also a lobbyist in the United States Chamber of Commerce, who was a top official in the U.S. Chamber of Commerce, A Wall Street lawyer, and a friend for many years of Victor Morowitz, Morgan's lawyer, Dwight Morrow, was a Morgan partner.

55:09By the way, there are several key Morgan partners I should mention now. As Morgan is getting older, of course, his son also comes in. They have the key Morgan partner so far, Perkins, of course, we know about. We're going to go to Perkins and Morgan's partner. There's Robert Bacon, Morgan's partner, with Secretary of State. There's Thomas W. Lamont, one of my partners, there's White Morrow, who's the father-in-law of Charles Lindbergh, and Anne Morrow Lindbergh married Charles Lindbergh, who was the daughter of White Morrow, and there's Henry P. Davison, we'll see in a minute, and Willard Strait, who comes out of the State Department, and Thomas W. Lamont, These are the Morgan partners that are important in politics. I'm not concerned with the straight Morgan partners, a whole bunch of them who are doing other things in politics and merging.

56:07Well, they're straight, comes out of the State Department, becomes a Morgan partner, sets up, this is very interesting, I think it's to symbolize the alliance between government and progressive Morgan people and progressive intellectuals, socialistic or progressive intellectuals. They decided to set up a new magazine, a weekly magazine, to promote liberal and progressive ideas, progressive meaning status and corporatism. So they set up a new republic, owned by Willard Strait, also Willard Strait, in addition to being more important, had the advantage of marrying a very wealthy woman who was a Whitney heiress, Dorothy Whitney, who was the daughter of the top Whitney people, so Whitney being Morgan and Rockefeller connected, Pratt Whitney connected. He starts off with a lot of money from his wife, Dorothy. If you want to be successful in life, marry a rich heiress.

56:57That was a good route. But anyway, he uses Dorothy's straight money and sets up The New Republic, which sets up as editors three of the top corporatist, corporate state, neo-fascist, proto-fascist intellectuals of the country, to edit this. It's still around, of course, The New Republic. and they, when we entered World War I, they were the major people pushing for the war effort the three editors were, the major editor was Herbert W. Crowley one of my least favorite people this whole character is a big shot intellectual, he was a Hamiltonian, constantly wrote arctic books famous book called The New Nationalism, he was a big pal of Teddy Roosevelt applying Teddy Roosevelt's intellectual ammunition in favor of big state, strong state, executive tyranny, Hamilton is against Jefferson, against individual liberty, between market, and on and on, in favor of corporatism and the whole bit in favor of war, in favor of strong state, I think in favor of eugenics too When his father was a Saint-Simonian, it gets real technical, it goes back to the French socialist, fascist socialist, intellectual Saint-Simon, who believed in the socialist, who believed in dictatorship by the elite, especially bankers.

58:19So the banker socialist was associated beautifully with Morgan, why not? By the way, one of the top socialist intellectuals in this country, the famous Charles Steinmetz, famous electrical inventor Steinmetz is the chief electrical theorist, electrician, we call him electrical engineer for General Electric, Morgan Company and Charles Steinmetz wrote a couple of books calling for socialism it turned out what he meant by socialism was a world run by one big corporation preferably General Electric and himself supplying the ideas. In other words, you don't like to listen to theoreticians like himself.

59:04Essentially, what he wanted was Steinmetz as a world socialist. But Steinmetz as a world socialist dictator. So, there's a very good book on the list, by the way, that you want to read in this. It's a guy named David Gilbert, for an excellent book which has been sort of neglected, called Designing the Industrial State. And he deals with what he calls collectivist intellectualism. Gilbert himself was a New Left historian in the 1960s. and he deals with proper acidity with what he calls collectivist and electoral, technocrat types and people like Steinmetz, he has a whole chapter on Steinmetz

59:42going into some sardonic detail in his character, anyway so anyway so Crowley is a, was that kind of a guy, he was also in 1920s and he was editor of the New in the Middle Republic, you hail Mussolini's regime as being an excellent, marvelous solution of the essentially pro-fascist. But you have to realize that liberals and businessmen, all during the 1920s and early 30s, were a favorite of Mussolini. It was great. Strong. You had everything. You had class harmony instead of class struggle. You had, instead of having proletarian types, you have the whole country integrated in big government, fixing production, fixing prices, cartelizing the system, creating organic, with the organic nation running everything. And they loved it. So fascism was really liked by most Americans, the entire American establishment, until the war against Ethiopia, until the Italian-Abesinian War in 1935 was it.

1:00:37Until then they all loved it. And so the fact that a few people were tortured here and there was sort of sloughed over. He was one of our good, he would now be considered a good dictator, a good free world advocate, a free world dictatorial advocate who was authoritarian rather than totalitarian I guess in the current jargon. So anyway, so it's only as I say with the Ethiopian war that everybody turned against the Mussolini's. Before that the Crowley also had a large editorial in the republic praising Mussolini as a great guy, made the trains run on time, the famous phrase that was used. At any rate, the other two guys were Walter Weill and Walter Lippmann then became a famous pundit and columnist and all that.

1:01:24So we had then, to me this symbolizes the Morgan Progressive Intellectual Alliance, a living embodiment in the New Republic magazine, which was founded in 1912, ready to hail the Wilson administration. So Lippmann gets to be, Lippmann was the youngest one of that group. He just graduated from college a couple years before. Big shot on the Intercollegiate Socialist Society and then he gets to be a real big shot and he loves it. There's a very good book on Lippmann by Ronald Steele, a very long biography which deals with him in some detail. The Federal Reserve system is again another story. I want to get too technical on the Federal Reserve. It's an extremely important development. What happened was, as Coco points out, the banks were getting too competitive. In other words, the banks were getting, from the time of the Civil War, which set up a quasi-centralized banking system with the outlawing of state bank notes, centralized in Wall Street. Wall Street was getting less and less strong. In other words, Chicago was becoming an important banking center on its own hook.

1:02:25Kansas City was becoming an important banking system. People were using the state banks more and more against the national banks. So the Wall Street banks were beginning to lose control over the banking system. Also, it wasn't inflationary enough. In other words, they weren't able to inflate. As soon as they inflated, there'd be a recession. There'd be prices would go up. People would call upon the banks for redemption and gold. There'd be a recession, and then the banks would collapse. Until 1907, there was a big banking panic. And so the Morgans, once again, and plus the other people, in this case, everybody agreed. The Rockefellers, the Morgans, Kuhn, Lowell, they all agreed you have to have a central bank. The Central Bank, they had to adopt this progressive system which had been pioneered by England in the late 17th century and adopted by most other countries in the 19th century.

1:03:13They needed a central bank to do what? To prop up the banks, to be able to have inflation, cheap credit, inflationary bank credit controlled by the government. So no one bank will collapse, in other words, to sort of support the whole system. The Central Bank, to be with the English banking theorists, Walter Badgett, said the lender of last resort, in other words, the bailout banks in trouble, okay? So the Central Bank is the lender of last resort, it centralizes reserves and inflates, it also can purchase government bonds, finance government deficits if necessary. So the central bank is an inflationary and centralizing device, and the public didn't like it.

1:03:58The public was generally suspicious of Wall Street for good reason, suspicious of central banks. They had to sell it to the public, and they sold this likely establishment, sold the Federal Trade Commission and meatpacking stuff and all the rest of it as ways to check big business, where it really was a monopolizing device, they sold it as a way to promote competition. Similarly, they sold the Federal Reserve System as a way to check inflation, to keep a lid on inflation. Banks are too inflationary. We need a central bank to prevent inflation, to regulate the system. So in other words, the Federal Reserve System operated and still operates as a cartilaging device for banks. It does for banks what the Federal Trade Commission did for general business, what the ICC did for the railways, what the Civil Aeronautics Board did for the airlines before they went out of business last year.

1:04:47All these efforts do, they cartelize the system, they restrict production, raise prices, keep at new entry. So the Federal Reserve system is a way of cartelizing the banking system. The banks loved it. Here the banks are being allegedly restricted, right? According to the propaganda, the banks are being curbed and limited by the Fed. Do you think they'd hate the Fed? They love the Fed. Why do they love the Fed? Because the Fed cartelizes them. The same way as the second bank of the United States in the early 19th century. They love these banks, which they're supposed to hate, because they pop up the system. They bail out banks in trouble, they cartelize, they inflate, and all the rest of it. Of course, sometimes there's marginal disagreements, obviously. they don't inflate enough for a certain bank, but they love the system and all these guys supported it, they had to do the American Bankers Association starts the parade, the Morgan's love it, the Chamber of Commerce

1:05:47love it, they have a jockey for power, they have a jockey for how to write this thing, and they have to worry about the Republicans and Democrats both liking it, so what happened was originally The original supporter was Nelson Aldrich, was a Rockefeller in-law, Senator Nelson Aldrich, and during the Taft administration, the Federal Reserve Bank proposal was called the Aldrich Plan. So it was a classic meeting, and the bankers loved it. One of the key figures in this was A. Barton Hepburn, The secret meeting at Jekylls Island in December 1910, the latter days of the Taft administration, A secret meeting in Jekyll's Island, which was a private island off the coast of South Carolina, no, excuse me, off the coast of Georgia, I think.

1:07:01And it was very hush-hush, because they wanted to have a secret meeting without the press finding out about it. So they took it, they chartered, Ludwig chartered a train from New York, a train to go down to Jekyll's Island. And he told them, we told the press we were going on a duck-hunting expedition. Just a few wealthy friends, duck hunting in Jekyll's Island. We still don't know to this day who... You have to use your private island like that, very swanky. You have to be invited by some guest. We don't quite know who the guest host was. Deep suspicion must have been J.P. Morgan. He's the only guy. None of these guys were members of the Jekyll Island Cubs. But J.P. Morgan was. I think they used his home or something. So Ulrich sets this thing up in D.P. Morgan's mansion down there, and the members are just a few people.

1:07:51What they did is they spent a whole week there and they hammered out essentially the Ulrich Plan, the Federal Reserve Commission Act. Here are the lit. Rockefeller, Henry P. Davison, Morgan Partner, and Paul Warburg of Kuhn-Loeb, one of the relatives of Jacob Schiff. Warburg, a German, was brought over from Germany and He was paid, the partner of Kuhl and Loeb, I think, his entire time was spent lobbying for, agitating for the Federal Reserve system. In other words, he didn't do actual banking work. He was paid, I think, something like $800,000 a year, which now amounts to about $6 million a year, something like that.

1:08:40He was paid, in real terms, the current dollar, $6 million a year, to do nothing but lobby for the Federal Reserve system. So, he was a relative of Schiff and Kuhl and Lowe, et cetera, and the famous Wodberg family. So we have then, these were essentially, these were the four guys at the meeting. Five guys. No, a guy named Norton. Okay. Charles Norton, who was the head of the First National Bank, which was also a Morgan, okay. Well, Morgan had two top banks, Guaranteed Trust Company and First Nation, and we also had, this is the Morgan partner, so we had Morgan Partner, JP Morgan Company Investment Bank, we had Charles Norton of the Morgan's First National Bank in New York, which is now, by the way, became part of National City, and so two Morgan people, two Rockwell people, There are a lot of people, one Kuhn-Loha person for good distribution of power plus one Kep professor to actually write up the act. You have to have a technician, an economist named

1:09:54A. Piot Andrew of Harvard to actually write the thing up. Sort of an unknown professor, he's not very well known in the economic circle, but he was there to draft the legislation and all that. So, it's a very small conference, very small, very high level, and they drafted, as I say, this act. In other words, what you had here was an agreement, okay? Hammered out, three forces, many of which were hating each other's guts at other levels. Backepall is Morgan and Kuhn, all of this is important. This is a banking system, this is money. This is credit, money, banking, and they all agreed on the basics of it. They drew up the plan, and Ludwig was supposed to push it through. And what happened then is that the Democrats, excuse me, the election of 1910, Democrats won the election of the House of Representatives.

1:10:48So they had to wait. Oldridge's plan was now, Oldridge's name was disliked, of course, by Democrats. So they had to wait for a year and set up lobbying institutions to make it bipartisan. They had to bring the Democrats in. Democrats won the House of Representatives in 1910. They won the presidential election in 1912. They couldn't have a Republican name on it, you had to have a Democratic name on it. So they waited until Wilson was elected and then when the Democrats took control of Congress, they got Carter Glass, a Democratic congressman from Virginia, to put his name on the legislation. So they also set up a phony citizens group in Chicago called the Citizens League for Sound Money, something like that.

1:11:34calling for a Federal Reserve system, because they want to make it as if it's a grassroots movement, not just a few bankers, they want to see the public behind it. And Chicago sounded safe, you know, because New York meant Wall Street. So they take it to Chicago and they have a Jane Lawrence lock-down as a distinguished economist who's unfortunately in favor of the Federal Reserve system, as a major propagandist on behalf of the Morgan of the joint banker group, calling themselves citizens and all that. and all that, actually he admitted later on that he was a pure tool of the bankers, he was just operating as a banker person. At any rate, so, and finally, as I say, when Wilson was elected, they pushed through, and they say it's not a central bank, they couldn't make it, if they had a straight central bank, one bank, the rest of the public was suspicious that the banks in general wouldn't like it, they said it's decentralized, it's not a central bank,

1:12:30The Federal Reserve System with 13 chapters, branches, or whatever it is. They had a very cumbersome, phony, decentralized structure. It's really quite centralized, but they made it seem as if it was decentralized to appease the congressman. Okay, we're getting into an exciting watershed in World War I. Before I get into it, I should mention the Federal Reserve System. Excuse me, finish that up. The Federal Reserve Board, which came in December 1913 and then really starts functioning around the summer of fall 1914. You have to get everything shaped up. It was a way of cartelizing the banking system so as to permit banks to continue inflating at a controlled rate.

1:13:15That was controlled by the government to know that the banks won't collapse. They can be a lender of last resort and the federal reserve can push reserves into the system. Reserve requirements were lowered, thereby permitting an inflation of money. The way the banking system works, and I'll only do this very quickly because I can't get into the techniques or technology of the banking system here, but basically the banking system, the commercial banking system, Chase and the Bank of, Chem Bank and all that, are inflationary engines. In other words, they're ways to increase the money supply. They're substitutes for counterfeiting. counterfeiters print money, you know, you take dollar bills, you print money, it's a $10 bill, you spend them banks create fake warehouse receipts, in other words, you deposit cash in a bank so, let's say you deposit cash, we're going to quickly you then have, this is the balance sheet of the bank, right, these are assets and these are liabilities plus equity really means

1:14:23in macro I go from money and banking of course I go through this whole thing step by step, but basically what you have is you deposit, let's say you deposit $100 in cash in a bank, cash could be gold, it could be treasury bills or whatever, it doesn't make any difference it's cash, okay you get then, the bank then has $100 of say cash the bank gives you a return So you can return for that a warehouse receipt saying you can claim this at any time, you can claim the $100 at any time you want, on demand, like a warehouse, you know, you deposit a watch in a warehouse and say, or furniture or something, you have your ticket, your warehouse receipt, you pay a fee for restoring it, and you can redeem the damn watch or chair at any time. So you have a $100 balance by $100 of warehouse receipts, Banking, which have taken two forms over the centuries. One is a note, a physical note,

1:15:21like a porn ticket or a warehouse receipt saying that the bank of Oshkosh or the bank of Great Neck promises to give you under redeeming demand or pay you back in demand $100 in cash on representation of the ticket. That's one way. This is called a bank note. The other way, a more sophisticated way, which was originally only done for large businessmen. In other In other words, this is the basic way the average person had a bank note. The other way, which is usually done for large merchants or big business types or international traders, etc. is by having open book accounts. In other words, instead of actually getting a physical note, you just get a record on the bank and they owe you $100. And you don't get any physical record.

1:16:07What you get is a transfer order. You have a deposit, or demand deposit, an open book account with a bank of $100 instead of a bank note. In the old days you could have a combination. You could have $50 in bank notes, $50 in the bank deposit, whatever you want. The way you transfer a warehouse receipt, you simply sell it to somebody. You buy something with it, you take the $100, you have the demand on the bank, you have $100. If the bank is considered honest and upstanding and everything, the warehouse receipt functions as if it were cash, as if it were gold or whatever it is. They trust the bank, the bank has a good reputation. A merchant or somebody selling you something will take the bank note instead of either you or him having to go to the bank and schlep to the bank and carry the gold out.

1:17:00They'll simply take the bank note as a... like traveler's checks are done now. They can take a traveler's check instead of the actual cash. Traveler's check is like a warehouse receipt. So either the bank notes or the demand deposit, in which case they accept the transfer order. You say, the transfer order says, Mr. Bank, Bank of J Street, Dear Sir, pay to the order of Joe Jones a hundred bucks. I sign Murray Rothbard, and then they take my hundred dollar account and transfer the open book, instead of being done through an actual physical note, transfer their liability, their liability from me to John Jones. This, of course, is called a check. What a check is, is a transfer order to the bank saying, Mr. Bank, please sign by me. Please take $100 that you now owe me and transfer it to John Jones.

1:17:56If the bank is well known, if I'm well known in this case, then John Jones will accept the check and then deposit it in his bank. At any rate, this becomes, over the years, the man deposit the man deposit or the warehouse receipt becomes equivalent to cash uh... the chances for counterfeiting, I call counterfeiting unlimited, it's a free banking situation of this sort the temptation for counterfeiting comes about when the bank says look these suckers they trust me, they don't come and demand the cash anymore because they think I have the money here and I owe it to them, but on the other hand very few of them really show up anymore let me start either stealing the gold itself and lending it out or else printing fake warehouse receipts and lending those out and they'll be accepted as if they're the same thing as regular warehouse receipts, which is what the banks started to do after centuries of getting a reputation for honesty and probity and all that, they started printing fake warehouses, let's say

1:18:55$200 of warehouse receipts, either in bank deposit or bank note, and they lend it out, put the $200, lend it out to something of charge interest. So now they have $300 in liabilities and demand deposits or bank notes, right? And they have $200 of IOUs to, I don't know, Michelangelo, whatever it is. So, in which they get interest. This is the way banks expand. They expand in two ways, either by actually going to people depositing their money there, or by lending money, lending money to the banks and they lend it out, The Bank can get away with this so long as people don't call for their money in any large amount.

1:19:42So this is called fractional reserve banking. In contrast to 100% reserve banking, banks actually keep the money. There's a whole argument between economists and moral theorists and legal theorists about whether this is fraud or not. I think it is, at any rate. The point is that with fractional reserve banking, you now inflate, you create more dollars. The way you manufacture dollars and run them out, this is an inflationary instrument. In other words, it increases the money supply, not by digging gold out of the ground, but by just printing tickets, or by creating money out of thin air in the bank, on the books of the bank. So, in a free market, this is limited play for this, because if I create it, let's say I have a Rothbard bank, Well, I only have a few clients, most of the other thousands of banks, people, if I ran out of check, if I lend out IOUs, if I create a bank deposit for people, they'll start using the money to buy things, and as soon as they do that, the other bank, their bank, calls upon me for redemption, and I haven't got the money, and I go bankrupt, so, there's no way that individual banks can really make it, can really have a play for this, and a free service.

1:20:55The only way they can really accomplish this systematically and not be afraid of going under at any moment is by having a cartel and the only way a cartel can succeed like any other industry is by the government enforcing it, by the government organizing the cartel and enforcing it, limiting competition and pouring money in and bailing out any bank in trouble as the whole banking system inflates together, happily inflates together, creates more money, drives up prices, transfers wealth and income from other people to themselves In other words, from people who are from the average consumer, from the guys who are in on the credit system, who borrow the money and all that sort of stuff, who are in with the government. This is basically, the way the governments have done this in the last couple hundred years is through the central bank, central bank system, which is a partnership of government and private banking.

1:21:43In other words, originally the Bank of England, the first central bank, organized in the 1690s, was simply a private corporation, which the government needed money, the king always needed money. Government is always dying for money. Their credit was exhausted because the king was confiscating. The king had borrowed money from the goldsmiths who had a major amount of capital. And they confiscated the gold to finance his war against the impuritans. And also he stopped payment on various bonds that they issued. So if the king has no credit, who's going to borrow into him? So as a result, and he couldn't tax anymore because he would have had his head chopped off if he had increased taxes in those days. The promoters of the Bank of England came up with a scheme, look, Sire, you give us a monopoly in oil banking, you give us in London and so forth and so on, give us privileges, and we will then buy your financial deficits, we'll give you Bank of England notes, warehouse receipts, you can spend them.

1:22:40And that's what happened, there was a racket by which the government organized, privileged the Bank of England and thereby benefited from the fact The Bank of England created money, instead of the King of England printing the money, which looked bad, looked inflationary, they have a private corporation, a distinguished corporation, which then creates money out of thin air, through this warehouse receipt system, fake warehouse receipt, and uses it to buy government bonds, which then the King spends, the government spends, everybody's happy, so the poor public finds the value of the pound is going down, they don't know why. In most countries in the world, except the United States, government deficits are financed by a central bank. Bank, in England, Israel and almost all the other countries, it's very easy to have a deficit. The central bank just buys the bonds and increases the money supply in a very inflationary manner to do it.

1:23:30The Federal Reserve system has done not quite as bad, but it's equivalent. The United States, as I say, had a semi-centralized banking system after the Civil War, but not really fully central. And Wall Street was suffering and the banks were collapsing. So the bankers got together at Jekyll Island and other places, this is all wings of the bankers, Rockefeller, Morgan, Kuhn, Lowell, they all agree you have to have cheap credit, you have the government bailing out of the banking system and organizing a cartel, and of course then the question is who runs it, we'll see. Central Bank, I guess together, lowers the fractional reserve requirement so that the banks can create more money, creates a monopoly, does it through monopolizing bank notes. In other words, before 1913, the large national banks, the large Wall Street banks, printed notes, in other words, you could go to Chase Bank, or City Bank, and wonder if you can get Chase Bank notes, which looks like Federal Reserve notes now,

1:24:29Chase Bank will pay to the account of, pay to the something, pay to the order of the bearer $100 in gold, the $100 in treasury bill, usually gold, so there were individual banks, the large banks, before the Civil War every bank had bank notes. After the Civil War, as you remember, the state banks were prevented from doing it. Only large Wall Street banks could print banknotes. Now only the Federal Reserve can print banknotes, for the result that all of our paper money, if you look at your paper money, says Federal Reserve note. And the banks then were limited in creating demand deposits.

1:25:14So if anybody wants a banknote for regular transaction, you're not going to pay a check to buy a newspaper or get a sandwich. If you want a banknote or paper money, your bank has to go to the Federal Reserve to produce and sell the bank, so to speak, the money. So in other words, the way the central bank has control over the banking system is by having a monopoly, a legal monopoly, a coercive monopoly on the issue of notes, of paper money. So the banks want it, it's not that the banks don't like the monopoly, they love it, because this gives the central bank control, so the central bank can inflate together. All the banks can now inflate together, with the central bank doing most of the inflating. The way the central bank inflates is by creating reserves, creating more cash, so to speak, or reserves on the central bank upon which the banks can pyramid in a multiple fraction, in other words, this is a federal

1:26:04reserve system, they have gold on which they pyramid and then the banks can pyramid on top of that. The pyramid is right now 10 to 1, which is what it was in 1913, so it's, in other words, for every dollar of reserves that the Fed creates, the banks can inflate 10 to 1 on top of it, creating fake warehouse receipts, demand deposits, which they multiply on top of reserves, which then becomes part of the money supply. I'm not going to go into the mechanics of it, you can check any Money and Banking textbook to see how this works, but anyway, basically what happens is another Federal Reserve buys an asset and gets deposited in a bank, then the banks determine 10 to 1 fake warehouse and they can't go under because every bank does it together because the central bank is maneuvering the whole thing and the central bank bails them out.

1:26:53So it's very important for the banks to create this. If the banks want to inflate, we have to suffer the consequences. It was a bipartisan thing that passed very heavily after a lot of jockeying positions. As I said at the end of last hour, in order to sucker in the public, which had a healthy distrust of Wall Street, They claim it's not really a central bank, it's really decentralized, because there are 12 chapters, whatever it is. It really was centralized. There was, however, a fight for power at the beginning, and in those days, the way the law was set up, the head of the Federal Reserve Bank of New York dominated the system. During the 1930s, the law was changed, and now the Federal Reserve Board in Washington runs the whole thing. The Federal Reserve Board of New York, the president of the Federal Reserve Board of New York, was then the key figure, was of course nominated and appointed by the Federal Reserve System, which is a partnership of government and the banks.