Thursday, December 19, 2013

Secretly Agreed, but Publicly Attacked

While reading Murray N. Rothbard's "Mystery of Banking," I stumbled with three curious paragraphs on pages 233-234 related to the creation of the Federal Reserve. It was stated that after a secret meeting at Jekyll Island, Georgia in December 1910 of most powerful banking personalities and came up with an agreement to pass a bill to create a central bank, two economists who helped in drafting the bill and the structure of the bank publicly opposed the bill they made. The question is why? Why after agreeing with the banking tycoons of that time in secret, these economists attacked the bill publicly?

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These are the three paragraphs:

"With intellectuals and politicians now sympathetic to a newly centralized statism, there was virtually no opposition to adopting the European system of central banking. The various shifts in plans and proposals reflected a jockeying for power among political and financial groups, eventually resolved in the Federal Reserve Act of 1913, which the Wilson administration pushed through Congress by a large majority."

"Amid all the maneuvering for power, perhaps the most interesting event was a secret summit meeting at Jekyll Island, Georgia in December 1910, at which top representatives of the procentral banking forces met to hammer out an agreement on the essential features of the new plan. The conferees consisted of Senator Nelson W. Aldrich (R., R.I.), a Rockefeller kinsman who had headed the pro-central banking studies of the Congressionally created National Monetary Commission; Frank A. Vanderlip of Rockefeller’s National City Bank; Paul M. Warburg, of the investment banking firm of Kuhn, Loeb & Co., who had emigrated from Germany to bring to the U.S. the blessings of central banking; Henry P. Davison, a partner of J.P. Morgan & Co.; and Charles Norton, of the Morgan-controlled First National Bank of New York. With such powerful interests as the Morgans, the Rockefellers, and Kuhn, Loeb in basic agreement on a new central bank, who could prevail against it?"

"One particularly ironic note is that two economists who played an especially important role in establishing the Federal Reserve System were highly conservative men who spent the rest of their lives attacking the Fed’s inflationary policies (though not, unfortunately, to the extent of repudiating their own roles in creating the Fed). These were University of Chicago professor J. Laurence Laughlin and his former student, then a professor at Washington & Lee University, H. Parker Willis. Laughlin and Willis played a large part, not only in the technical drafting of the bill and the Fed structure, but also as political propagandists for the new central bank."


Rothbard, M. N. (2008). The mystery of banking. Online. Available: