Return to Jekyll Island
Research for Online Investors

by John Dalt

11/08/10

The Lords of Finance returned to Jekyll Island last week to reflect on the founding of the Federal Reserve 100 years ago.  The Jekyll Island Club Hotel is where six men met in November 1910 to devise a plan for a central bank.

The country had come out of the Banker’s Panic of 1907 when the stock market fell close to 50%, and there were runs on banks.  The Panic was triggered by a failed attempt to corner the market on shares of the United Copper Company.  The company’s stock was bid up then fell.  Banks that lent money in the scheme suffered losses and depositors began withdrawing money.  A liquidity crisis developed and spread to other banks and trusts.

The Knickerbocker Trust Company was New York City’s third largest Trust.  It failed as stocks fell and investors pulled money out.  Financier J.P. Morgan intervened, pledging his own money to backstop banks.  He enlisted other bankers to do the same to restore confidence in the weakest banks.

The panic was largely over by November of 1907.  Senator Nelson Aldrich established and chaired a commission to investigate the crisis and propose solutions in 2008.  In 1910, Senator Nelson met with six bank executives at Jekyll Island to discuss the necessity and lay the groundwork for the Federal Reserve System.  Jekyll Island was a private hunting and leisure club owned by J.P. Morgan.

Attendees were Senator Aldrich, Abraham Andrew, asst. secretary of the Treasury; Frank Vanderlip, president of National City Bank of New York, the nation’s largest bank at that time (today’s Citigroup, Rockefeller); Henry Davidson, senior partner of J.P. Morgan; Charles Norton, president of J.P. Morgan’s First National Bank of New York;  Benjamin Strong, head of Morgan’s Bankers Trust Co.; and Paul Warburg, a partner in Kuhn, Loeb and Co. and the U.S. representative of the Rothschild family.

If the previous paragraph listing the attendees of the Jekyll Island meeting doesn’t scare you, you didn’t read it.  It is interesting that J.P. Morgan didn’t have to attend, he had three attendees there, and the Rothschilds had a seat at the table.

The meeting was secret, with no mention of it until 1916, six years later, and three years after the Federal Reserve was created.  None of the attendees admitted attending until Warburg in 1930, but he would not identify any other participants.

We have discussed the passing of the Federal Reserve Act, you can read about it in What is the Fed.  The genesis of the Federal Reserve is cloaked in secrecy, and legislative intrigue in the actual creation.  Why must such important work be done in secret and with manipulations of the political process?

We discovered Frank Vanderlip’s autobiography on the internet.  It is posted by his great grandson, Eric deCarbonnel.  The title is From Farm Boy to Financier, it is an interesting account of a young man’s life in the 1800’s, banking through the panic of 1907 and the creation of the Federal Reserve.

To the mailbag:
Here is an article about Rare Earth finds from the Anchorage Daily News…you told us so.---subscriber C.F.

Your reporting on the cost of $200 Million per day of Obama's trip to India was blatantly FALSE!!  Check it our on Snoops---paid up subscriber D.W.

John’s reply:  It may be incorrect.  I did not use this the first day I reported on the trip, as I could not find multiple sources except for the Indian paper.  I did cite this number the second day in the mailbag section.  I try to be accurate, and this may not have passed the test.  I do not trust Snopes as a final word though.  If you look at their "debunking" of facts and rumors it has a decidedly liberal slant.  So…how much is it?  $100 million a day?

The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions.  It may contain errors and you should not make investment decisions based solely on what you believe you have read here.  Do your own research, it is your money.  If you lose it, it is your responsibility, not ours or your grandmothers!  The editor may or may not have a position in any securities discussed.  The editor may have held a position in a security earlier, or in the future.

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