“President James Madison signed the Second Bank of the United States into existence, but when Andrew Jackson took office, he refused to renew its charter. He was a lot like Thomas Jefferson and saw the central bank as an engine for corruption. When the economy got rocky, Jackson wisely pushed for all federal land sales to be transacted in gold or silver. Many banks adopted a similar modus operandi and it started to catch on.
“Some banks, though, were so leveraged, they couldn’t pay their customers when they came looking for their money. This led to waves of bank runs, some of which actually created serious imbalances in the economy. One of the worst ‘bank runs’ led to the creation of the Federal Reserve.”
Harvath noted Wise’s derogatory tone when he used the term bank run. “This is the phony crisis you mentioned?”
He nodded. “Are you familiar with something called the Hegelian dialectic?”
“I am. It’s where a group or an individual creates a problem, knowing full well in advance how people are going to react to it. They then begin agitating for something to be done about the problem, for things to change. Once the masses are then worked up enough and desperate enough for something to be done, the party behind the problem unveils their solution. The people are thrilled to have a plan, any plan, and so demand that it be implemented. They never seem to realize that they’ve been manipulated and that they haven’t really ushered in change, but actually a much worse version of what they had previously, only now in brand-new packaging.”
“That’s exactly what happened with the Fed. A problem was manufactured by a powerful group of people who sat on the sidelines waiting for a panicked citizenry to beg for a solution. Once people started begging loud enough, all this group had to do was set the wheels in motion and make it look like everything was unfolding naturally.
“In this case, it was a group of New York bankers colluding to set up a third central bank that would give them a monopoly over the banking system. Shortly after the New Year in 1907, an article appeared in the New York Times by investment banker Paul Warburg, who cautioned that Americans needed to reinstate a central bank if they wanted to avoid any more terrible bank runs.
“One of Warburg’s banking partners then gave a speech to the New York Chamber of Commerce warning that if the United States didn’t set up a central bank, the country was going to undergo the most severe and far-reaching crash in its history. The sky is falling. The sky is falling. All they needed then was to be proven right. Enter their pal, banker J. P. Morgan.
“Once a slew of side bets were placed that the stock market was going to fall, a run was launched on the stock of a company called United Copper—one of J. P. Morgan’s biggest competitors. Panic took over the market. It was like all of the water being sucked out to sea before a giant tsunami comes ashore. Suddenly, everyone wanted out.
“New York banks friendly to Morgan and Warburg yanked their money, the stock market dropped nearly fifty percent, and New York’s third-largest trust collapsed. From there, the panic spread across the country as citizens rushed to their own banks to pull out all of their money.
“It was an all-out panic and people were screaming for something to be done. Enter once again J. P. Morgan, who pledged his own funds to help stabilize the banking system.
“Rallying other New York bankers to join him, several of whom had helped to exacerbate the panic, Morgan magically stemmed the bleeding and the panic began to subside. But as it did, panic was replaced by a nationwide outcry that something be done so that this kind of thing never happened again.”
“Never let a good crisis go to waste, right?” said Harvath.
Wise smiled. “Precisely. The people blamed the bankers, but the bankers masterfully blamed ‘the system,’ which led to everyone clamoring for the system to be reformed. Congress instantly responded by setting up a special commission. Magically chosen to head the commission was a profiteering, multimillionaire Rhode Island senator who was friends with Morgan and Warburg, as well as being deep in the pockets of the rubber and tobacco industries. His name was Nelson Aldrich.
“As the United States was one of the last major nations without a central bank, Aldrich decided his National Monetary Commission should study the central banks of Europe—and that’s exactly what he and his entourage did, spending almost two years touring Europe, wining and dining at an expense of more than three hundred thousand dollars to the American taxpayers.”
Harvath shook his head. “The politicians were crooks even back then.”
“It gets worse,” said Wise. “After nearly two years of ‘study’ and over three hundred thousand dollars spent, Senator Aldrich hadn’t filed a single report on what he had learned, nor had he offered any solutions for ‘reforming’ America’s banking system.”
“The guy really was a crook.”
Wise held up his hand. “We haven’t even gotten to the worst part yet.”
“It gets worse?” said Harvath.
“Much. And I think it will give you an idea of why someone might be angry enough to want to target and kill people at the Federal Reserve.”
CHAPTER 20
Wise studied Harvath for a moment before speaking. “It was a cold, windy evening in November of 1910, when a group of the most powerful bankers in the United States snuck out of New York City on a top-secret mission. In Hoboken, New Jersey, posing as a duck-hunting party, they boarded an opulent private railcar bound for an even more opulent, private resort off the Georgia coast called Jekyll Island.”
“Which is where Claire Marcourt’s body was found.”
Wise nodded and continued. “Among the group was Abraham Piatt Andrew, who was assistant secretary of the U.S. Treasury; Frank Vanderlip, who was president of the most powerful bank in the country, the National City Bank of New York, which represented the oil interests of the Rockefellers; as well as the aforementioned investment banker who had been publicly calling for the U.S. to adopt a central bank, Paul Warburg.
“An interesting tidbit about Warburg, in addition to drawing an eye-popping salary even by today’s standards of five hundred thousand dollars a year: back in Germany, his family represented the interests of one of the greatest European banking families, the Rothschilds.”
“Nice work and even nicer clients if you can get them,” said Harvath.
“Nothing happens by accident with these people,” said Wise. “Also on board were Benjamin Strong and Henry Davison of J. P. Morgan Company, as well as Charles Norton, the president of J. P. Morgan’s First National Bank of New York. There to greet them all as they boarded was the owner of the mahogany-lined railcar, our pal, Senator Nelson Aldrich. In total, there were six men who were conservatively rumored to represent one-fourth of the world’s wealth.
“With the shades drawn and white-gloved staff seeing to cigars and cocktails for the men of the lustrous private car, the train steamed out of Hoboken south toward Brunswick, Georgia, where they would complete the final leg of their eight-hundred-mile journey by boat to Jekyll Island.
“Lest any of the staff figure out who their passengers were or what they were up to, the powerful men had all agreed to address each other by first names only. Vanderlip and Davison were so cocky, though, they insisted on being called not Frank and Henry, but Orville and Wilbur.”
“Like the Wright brothers? Why?”
“Because,” said Wise, “according to Vanderlip, he and Davison were always ‘right’ about everything.”
Harvath shook his head.
“The last thing any of them wanted was for word to get out that they had all come together for one very sinister purpose.”