Finance is a Power Game

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EDITED TRANSCRIPT – Finance is a Power Game

LS: Hi Nomi, Let’s talk about your new book. What was the motivation to write the book and what is the main idea behind it?

Nomi Prins: My motivation stemmed from a novel I had written before this book, which was called ‘Black Tuesday’, a work of historical fiction about the 1929 crash. In order to do the research for that book, which was not as substantial as the research I wound up doing for ‘All the Presidents’ Bankers’ I discovered this meeting that took place at the Morgan Bank on 23 Wall Street, just a quick little walk from the back of the New York Stock Exchange on October 24th, 1929. This was when the stock market was beginning its initial decent, after which it bumped up and down a few times but ultimately lost 90 percent or so of its value over the next few years.

But on that day, there were six bankers, the big six bankers of the time that convened at the house of Morgan under the request of a man named Tom Lamont, who was the acting chairman of Morgan. Jack Morgan, the actual chairman, was over in Europe traveling. Lamont called the five main bankers of the city to come and after a 20-minute meeting they decided after 20 minutes to each put in 25 million dollars to save the stock markets. They all had these secrets that they were hiding in that room, aside from the fact that the market was spinning out of their control. One of the men was Al Wiggin; the head of Chase; he was shorting Chase shares while he was talking about buying them to save the markets. Charles Mitchell was another fellow in that room, who ran National City Bank, which is now part of Citigroup. He had this deal that he wanted to do – the biggest merger of the time would go through if he could keep his shares up which would be used to pay for the merger. So he really had other reasons to save the markets besides helping the general population from spill-out or the economic fall-out.

That whole meeting and drama of the scene and the way in which these big six decided what to do, and the way that they were supported by president Herbert Hoover was fascinating. After their decision, they were touted in the press, in the New York Times and so forth as having saved the markets again and there was so much congratulation. All of that really stuck with me. And so for the book ‘All the Presidents’ Bankers’ I followed this idea of the big six; the today we have big six banks again, as well as we did before the crash of 1929. Six banks in the US controlled much of the financial markets, and not just from a wealth and power perspective; for there was a political financial line that could be drawn around bankers and presidents during that time, and today.

I started examining this through the presidents’ perspective – which bankers they had relationships with, that they trusted to fix the country, that they hung out with socially, that they went yachting with, that they were in clubs with, that they went to Ivy League universities with and so forth. This is how I further shaped the idea and research for this book, which took me to all the presidents’ archives around the country, from Teddy Roosevelt, who was the president during the panic of 1907, which is where I start the book, through Barack Obama who does not have an archive yet because he is still in office, and all the documents in between I could find.

LS: You have mentioned 1907, and the most dominant banker back then was John Pierpont Morgan. Was he basically the representative of the City of London and British banking on Wall Street?NP: He was the one who had the closest ties, both from a personal standpoint and from the fact that the Morgan Bank had ties with the City of London as well as Paris. At the time they had companies that they were associated with in both of those cities. As for the background to the panic of 1907, it was a huge bank panic in the United States, people particularly in New York were rushing the banks to get their deposits out because there was a confidence problem and a larger banking crisis brewing. Teddy Roosevelt was scared that that it would spill into a larger economic crisis for the country. He called upon J. P. Morgan to fix the situation; this was in 1907, 22 years before the crash in 1929 where his bank was also at the center. Morgan certainly represented international interests with respect to the US financiers; he was the most powerful, most international of the US financiers, but he was also very deeply concerned about his growth in status in the United States. After that point there was much more growth for the Morgan bank after World War I and World War II.

Even before the panic in 1907, in the 1890s, it was the Morgan family – and this is one of the other large themes of my book, that not just individuals controlled the political/financial alliances and policies of the US domestically and globally, but these are a small handful of elite families that have retained power for decades, for over a century, whose legacies continue to maintain that influence and power. The Morgan family was certainly one of the main families that did that. In the 1890s one of the Morgan’s, J.S. Morgan had helped save the City of London financially when the Bank of England could not do it. So this idea of the private banker saving other private bankers, both internationally as well as domestically, was born a little bit before my book but certainly continued into the 20th century.

LS: If I asked you related to the panic of 1907 cui bono, what would be your answer?NP: The real benefactor of the panic of 1907 was J. P. Morgan, of course, who ran the Morgan Bank at the time and was the key influencer and economic confidante of president Teddy Roosevelt, who gave him the power and the decision making ability backed by the White House and the Treasury Department to decide which banks would live and which banks would die during the bank panic of 1907, which is what Morgan did. He chose to support the banks that were related to him in some manner, whether they were run by his friends or associates or relationships or in which he just had financial interests. After the panic of 1907 it was really the Morgan family, the Stillman family, who were running National City Bank, the Bakers, who were running First National City Bank, (and those two banks ultimately became what we know today as Citigroup, which is one of the big six banks today, as of course Morgan still exists today in the form of J.P. Morgan Chase, another of the big six banks.) The benefit was really to Morgan and helped make him confident to steer the ship for the establishment of what became the Federal Reserve that became THE bank for the big banks.

LS: How was the panic of 1907 used by Morgan and Rockefeller interests to create the Federal Reserve?NP: That is a very interesting question. What happened was – even before the panic – these financiers; the new power league in America, wanted to find a way to push forward into what I call the age of financial capitalism – though they did not call it that. The idea was that you could make money now out of money as opposed to just having it be connected to industrial interests like steel and oil – although the Rockefellers had made a substantial amount of money and would continue to do so with the Standard Oil Company and other interests. But they, particularly William Rockefeller was looking for a way of making money for the sake of making money and becoming part of one of the “money trusts” in the early 1900s.

After the panic of 1907 J. P. Morgan and to a lesser extent Rockefeller – the Rockefellers were not involved in the actual meeting that took place at Jekyll Island although William Rockefeller did have a membership at the Jekyll Island Club at the time. There in a meeting that took place in 1910, six men met to bang out the blueprints for the Federal Reserve. They included a fellow from the United States Government, Senator Nelson Aldrich, who was a Rhode Island senator and very connected to the banking community. He knew Morgan; he knew the Rockefellers and so forth. And he and one of his assistant treasury secretaries met with four bankers, Frank Vanderlip, Henry Davison, Paul Warburg and Benjamin Strong, all whom were connected to Morgan. It was J. P. Morgan’s membership as I talk about in the book that allowed them to even meet at Jekyll Island. It was a very exclusive club at the time; you needed to be a member. None of these people were members and J. P. Morgan was not at the meeting that took place.

In fact, and this is sort of where the Rockefeller contingent comes in on the outside of that, Nelson Aldrich was not even planning on going or asking about going to Jekyll Island; he wanted to have these meetings in his Rhode Island estate to still get away from the public but also to be in his own estate, which was north of New York and certainly north of Georgia, which is where Jekyll Island is. But he wound up getting hit by a trolley car in Manhattan, in New York City, while he was visiting there to talk to Morgan and some other people about this whole idea. So he was convalescing; he was not sure he was going to go anywhere and that was when J. P. Morgan suggested he go to this area to get this done, and gave the invitation. A lot of arrangements were made on Jekyll Island to have these people come because it was still November; it was not in season yet. Jekyll Island was into season in December and January, when all the rich families would come down for the holidays and all the rich men would talk and all the rich ladies and children would sort of hang out and play.

But this meeting happened because of J. P. Morgan and also Nelson Aldrich, whose son Winthrop Aldrich became a head of Chase Bank for two decades, and whose great-nephew, David Rockefeller, became also the head of Chase for two decades, and whose other great-nephew, Nelson Rockefeller, became the four-time governor of New York City. So this family line that started from this Federal Reserve period was evident more recently as well.

The bankers’ interests were to make sure that in a panic situation there would be a Federal Reserve that would back the banks so that there would not be a greater crisis, and that they would not have to put up their own money or scrounge around to figure out how to save themselves or to save their system. That was the impetus for the Fed – to have a consolidated entity that could also create currency that could back them in times of panic. And from the American government perspective, from William Taft, who was the president after Teddy Roosevelt and Woodrow Wilson, who was the president after him – they both believed that a Federal Reserve was required to basically – and this is not what is discussed in history so much but it is in my book – to promote American power into the new century. This idea of having a competitive central bank that was aligned with the private banks was something that was very important to these presidents of both parties; both of whom had very strong personal connections to the Morgan’s, to the Aldrich’s and to the Rockefellers and to other families that were operating the money trusts at the time.

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