Wall Street and FDR: Chapter 6

Prelude to the New Deal

In this chapter we will be setting the stage further for the full explosion of corporate socialism in America that has reached its terminal stage in our nation today. We will be exploring the history of Roosevelt's past and how they were down with collectivism before the Civil War. Says our host, Dr. Sutton:

The full story of the construction of corporate socialism in the United States, as envisaged by the financier-philosophers identified in the previous chapter, is beyond the scope of this book, but we can gain greater perspectives through a brief look at a few facets of the historical process: for example, Clinton Roosevelt's system a century before FDR, Bernard Baruch's War Industries Board, and Paul Warburg's Federal Reserve System.

New York Assemblyman Clinton Roosevelt, a distant cousin of our subject, proposed a New Deal type system way back in 1841. A similar outline was followed 75 years later by Woodrow Wilson and Bernard Baruch, who were of a like mindset. Wilson and Baruch were behind the War Industries Board, the forerunner of our military-industrial-complex.  The years of the 20s and 30s were those where corporate socialists reigned using their "economic planning" to usurp power in a way that not one in a hundred thousand could detect. We have learned how the JP Morgan company wired Mussolini a whole bunch of money to get going. One could draw many parallels between Mussolini's fascist state and the National Recovery Act. Meanwhile, Bolshevik Russia was the recipient of Wall Street perks, having Guaranty Company send gold into Russia.  I won't even get into how Hitler was subsidized by these same people, that's for the next series. The overarching theme here is that from the time period of 1910 - 1940, a socialist/collectivist system was being implemented simultaneously all over the globe.

Getting back to Clinton Roosevelt, he writes this book which Sutton describes like this:

Clinton Roosevelt, The Science of Government Founded on Natural Law (New York: Dean & Trevett, 1841). There are two known copies of this book: one in the Library of Congress, Washington D.C. and another in the Harvard University Library. The existence of the book is not recorded in the latest edition of the Library of Congress catalog, but was recorded in the earlier 1959 edition (page 75). A facsimile edition was published by Emanuel J. Josephson, as part of his Roosevelt's Communist Manifesto(New York: Chedney Press, 1955). 

(Bonus Fact: Thanks to the internet, it's available on Google for you to check out - just hit the link above!)

Pretty weird, huh?  Well this book is not set up in paragraph form but as a discussion between Roosevelt and a "producer", who represents the masses. Take a gander:

P. [Producer] But I ask again: Would you at once abandon the old doctrines of the Constitution?
A. [Author] Not by any means. Not any more than if one were in a leaky vessel he should spring overboard to save himself from drowning. It is a ship put hastily together when we left the British flag, and it was then thought an experiment of very doubtful issue.

P. Whose duty will it be to make appointments to each class?
A. The Grand Marshal's.
P. Who will be accountable that the men appointed are the best qualified?
A. A Court of physiologists, Moral Philosophers, and Farmers and Mechanics, to be chosen by the Grand Marshal and accountable to him.
P. Would you constrain a citizen to submit to their decisions in the selection of a calling?
A. No. If any one of good character insisted, he might try until he found the occupation most congenial to his tastes and feelings.

Production in the system had to be equated with consumption, and the handling of "excesses and deficiencies" reflected the ideas pursued in the Swope Plan, the literary base of Roosevelt's NRA. The system is certainly akin to that used in Bernard Baruch's War Industries Board during World War I. This is how Clinton Roosevelt describes the duties of the Marshal of Creation, whose job it is to balance production and consumption:

P. What is the duty of the Marshal of the Creating or Producing order?
A. It is to estimate the amount of produce and manufactures necessary to produce a sufficiency in each department below him. When in operation, he shall report excesses and deficiencies to the Grand Marshal.
P. How shall he discover such excesses and deficiencies?
A. The various merchants will report to him the demand and supplies in every line of business, as will be seen hereafter.
P. Under this order are agriculture, manufactures and commerce, as I perceive. What then is the duty of the Marshal of Agriculture?
A. He should have under him four regions, or if not, foreign commerce must make good the deficiency.
P. What four regions?
A. The temperate, the warm, the hot region and the water region.
P. Why divide them thus?
A. Because the products of these different regions require different systems of cultivation, and are properly subject to different minds.

A sketch of the ideas presented in Clinton's book.
Freaky deaky, huh?

Then there is a Marshal of Manufacturers overseeing the whole system—similar to Baruch's position as economic dictator in 1918 and Hugh Johnson's position as Administrator of the National Recovery Administration in 1933. The Marshal's functions are described by Clinton Roosevelt as follows:

P. What are the duties of the Marshal of Manufacturers?
A. He shall divide men into five general classes, according to the printed diagram.
1st. The manufacturers of all the means of defence against the weather.
2d. All kinds of viands.
3d. Metals and minerals.
4th. Chemicals.
5th. Machinery.All these have on the printed diagrams, banners, with a glory on one side and an appropriate motto on the reverse, showing the advantage each class is to all others: and by the way, we would remark, this should be universally adopted, to give a just direction to man's love of glory.
By a reference to the chart, and what has been before observed, the duties of the officers under this department will all be obvious.

Clinton Roosevelt's society can be summed in his phrase, "The system should rule, and the system should look chiefly to the general good."

Are we getting the picture? Some have always wanted a centrally planned society. They don't want the rabble to outdo them, and jeopardizing their elite positions. That would never do. General good to them is what is generally good for them, you the individual don't figure into their plans much, but as a commodity to be controlled.

Now we will learn how war is used as a weapon to centrally plan a nation. It all started back before WW1. Bernard Baruch, famous socialist was invited to plan a a defense mobilization committee. This became the War Industries Board, which replaced the General Munitions Board. The WIB would collectivize all businesses that supplied war materials. If you didn't play their game, you didn't get into the club. Anyone who could see this for what it was, was immediately excluded. Yeah, they really, really needed World War 1 to happen to pull this off. Recall what the Carnegie Corporation's founding minutes said, that there was no faster way to bring about a change in a society than to put it through a war. In wartime, people will accept what they will not in peace time. 

Committees of industry, big business and small business, both represented in Washington, and both with Washington representation back home—this could be the backbone of the whole structure. -- Margaret L. Coit, Baruch's Biographer

All banksta boys make the front of their own mags!

By March 1918 President Wilson acting without Congressional authority, had endowed Baruch with more power than any other individual had been granted in the history of the United States. The War Industries Board, with Baruch as its chairman, became responsible for building all factories and for the supply of all raw material, all products, and all transportation, and all its final decisions rested with chairman Bernard Baruch. In brief, Baruch became economic dictator of the United States, or "Marshal of Manufacturers" in Clinton Roosevelt's scheme. Yet, as Margaret Coit points out, "... the creation of this office was never specifically authorized by an Act of Congress."

At the end of WW1, which many independent scholars agree, was not a necessary war for America to be involved in, these banksters had developed a "scheme of positive control of the major portion of the industrial fabric..success bred courage for more success, and trade after trade was taken under control with an increasing willingness on the part of the interests affected." These are the words of Bernard Baruch himself.


The flagship operation for using corporate control of government was the War Industries Board chaired by Baruch with the following big wigs:

 Alexander Legge of International Harvester (vice chairman), with E.B. Parker and R.S. Brookings (whose ideas we have already examined) in charge of price fixing. Assistants to the chairman were: Herbert Bayard Swope, brother of Gerard Swope of General Electric; Clarence Dillon of the Wall Street firm Dillon, Read & Co.; Harrison Williams; and Harold T. Clark.

These men were responsible for the seed of the military industrial complex. The goal was to create a peacetime "planned" economic system. According to Baruch, the most important lessons of the War Industries Board were:

1. The establishment of a peacetime skeleton organization with 50 commodity divisions, meeting to keep abrest of the development of industry and develop information. The thrust of this proposal was that the information needed for peacetime planning should be collected and that the direction of the organization should stem from large-scale or major industry.
2. That the government "should devise some system for protecting and stimulating internal production of certain raw materials used in war," and
3. That war-related industries should be encouraged by the government to maintain skeleton organizations for wartime use.

Baruch argues that the rules regarding trade have changed:

We have been gradually compelled to drift away from the old doctrine of Anglo-American law, that the sphere of Government should be limited to preventing breach of contract, fraud, physical injury and injury to property, and that the Government should exercise protection only over non competent persons.

Sutton adds:

It is necessary, writes Baruch, for government "to reach out its arm" to protect "competent individuals against the discriminating practices of mass industrial power." 

Here we have government protecting people who have bought off government favor from the free market. The fox should be guarding the hen house, in other words. Baruch then goes on to trash the Sherman and Clayton anti-trust laws, calling them antiquated. Also, bear in mind, that the WIB constructed lots and lots of trade associations, which would then collude together. Baruch admits that some benefited immensely:

Many businessmen have experienced during the war, for the first time in their careers, the tremendous advantages, both to themselves and to the general public, of combination, of cooperation and common action with their natural competitors.

If these cooperative attributes are not continued, argues Baruch, then businessmen will be tempted "and many of them will be unable to resist" to conduct "their business for private gain with little reference to general public welfare." On the other hand, trade associations can be of the greatest public benefit to achieve the desired end of cooperation. Baruch concludes:

The question, then is what kind of Government organization can be devised to safeguard the public interest while these associations are preserved to carry on the good work of which they are capable.

Baruch, like any good communist, proposes government organizations to develop these principles of cooperation and coordination. Dr. Sutton deconstructs Baruch's proposals:

The gainers from Baruch's proposals would be the few who control major industrial sectors—particularly iron and steel, raw materials, electrical goods, that is, those industries already well established and fearful of competition from more enterprising newcomers. In other words, the gainers from his proposal would be Bernard Baruch and the Wall Street coterie that effectively controls big business through its interlocking directorships. The gut issue then is: who benefits from these proposals for trade associations and government coordination of industry? The principal, indeed the only major benefactors—apart from the swarms of academic advisers, bureaucrats, and planners—would be the financial elite in Wall Street.

What we have here is Frederic Howe's Confessions of a Monopolist in action. Also make a note that Baruch was influential in Roosevelt's NRA, invested $200K in FDR's election, and Hugh Johnson, a Baruch acolyte, was the boss of the National Recovery Act, etc.

PAUL WARBURG AND CREATION OF THE FEDERAL RESERVE SYSTEM
If you've been following this post this far, then I will make the assumption that you have a working knowledge of the history of the Federal Reserve. But I'll try to embellish your Fed history knowledge with some details.


Paul Warburg is the man who was really, really behind the idea of the Fed. Kuhn, Loeb & Co. was the Warburg bank in America, and much has been written on this influential family. Right after the Panic of 1907, which you should know was artificially created by the Morgan interests, Paul Warburg wrote two pamphlets calling for a central bank. He was appointed by Wilson as a member of the first Federal Reserve Board. During World War I, controversy ensued because his brother Max was still doing big time banking in Germany, but after all that, he became Chairman of the Fed in the 20s. 

Sutton stretches out the spiderweb of Warburg:

After passage of the 1913 Federal Reserve Act, Warburg and his banking associates promptly set about using the legal banking monopoly for their own ends and purposes, as suggested by Frederic Howe. In 1919 Warburg organized the American Acceptance Council and served as chairman of its executive committee in 1919-20 and as its president in 1921-22. Then in 1921 Warburg organized and became chairman of the private International Acceptance Bank, Inc. while still serving on the Advisory Council of the Federal Reserve Board. In 1925 Warburg added two more private acceptance banks: the American and Continental Corp. and the International Acceptance Trust Co. These banks were affiliated with the Warburg-controlled Bank of the Manhattan Company. As an aside it may be noted that Paul Warburg was also a director of the American IG Chemical Corp., the American subsidiary of IG Farben in Germany. I.G. Farben was prominent in bringing Hitler to power in 1933 and manufactured the Zyklon-B gas used in Nazi concentration camps. Warburg was a founding member of the Carl Schurz Memorial Foundation, a propaganda organization established in 1930, a director of the prestigious Council on Foreign Relations, Inc., and a trustee of the Brookings Institution.

Did you head just explode? Got corruption much? This all laid down the foundation for the big '29 crash. Murray Rothbard wrote:

While purchase of U.S. securities has received more publicity, bills bought were at least as important and indeed more important than discounts. Bills bought led the inflationary parade of Reserve credit in 1921 and 1922, were considerably more important than securities in the 1924 inflationary spurt, and equally important in the 1927 spurt. Furthermore, bills bought alone continued the inflationary stimulus in the fatal last half of 1928.

Surely, Warburg's leading role in the Federal Reserve System was not unconnected with his reaping the lion's share of benefits from its acceptance policy.

Warburg got society to work for Wall Street. One of his biographers put it this way:

Paul M. Warburg is probably the mildest-mannered man that ever personally conducted a revolution. It was a bloodless revolution: he did not attempt to rouse the populace to arms. He stepped forth armed simply with an idea. And he conquered. That is the amazing thing. A shy, sensitive man, he imposed his idea on a nation of a hundred million people.

As more financially astute people than myself has said, Wall Street concoct these "products" which are merely legal vehicles for them to do as they please. Next, we're going to hover our magnifying glass over the International Acceptance Bank, Inc.

THE INTERNATIONAL ACCEPTANCE BANK, INC.
Sutton gives us the brief overview

The bank was founded in 1921 in New York and affiliated with Warburg's Bank of the Manhattan Company. However, the board of directors suggests that the most important elements in Wall Street also had a significant interest and control in and profited from the International Acceptance Bank. Further, we find a striking link-up between its affiliated financial institutions and a general scheme to establish corporate socialism in the United States.

You can read the whole thing to get the details, but here's the deal, all the big wigs from Wall Street, including those with the infamous 120 Broadway address, where all in this International Acceptance Bank.


Also good to know is that the Warburg and Roosevelts were real chummy in their personal lives. According to James P. Warburg, 

 "It so happened that I had known the President elect's eldest son, James Roosevelt, for some years, because he had been living in one of the cottages on my Uncle Felix's estate in White Plains."

James Warburg was also a close advisor to FDR writing the following memo in 1933:

Memorandum for the President: Domestic Currency Problem. The Administration has, in my judgment, never faced a more serious situation than it does today. The entire recovery program, which is the heart of its policy, is jeopardized by uncertainty and doubt in the monetary field. The National Recovery Act cannot possibly function to any useful end if there is fear of currency depreciation of an unknown amount and fear as to monetary experimentation. There has already been a tremendous flight of capital, and this flight will continue at an increasing pace so long as uncertainty prevails.

J. Warburg went on to recommend that all things monetary be "centralized" in either the Treasury Department or the Fed. A nice, tidy package, no?  But that's not all, FDR's Secretary of the Treasury at this time was William Wooden, who had been the Federal Reserve Director of the New York Bank from '25-'31. FDR's favorite uncle, Fred Delano was vice chairman of the Federal Reserve Board under Wilson in 1914, and was at the Richmond Fed from 1931 to 1936. 

When the depression hit, FDR called in the very same people responsible for setting up the same house of cards. Out of the "crisis", these central planners were able to reorganize and federalize so much. And just now all of those programs, such as social security, are starting to unwind and the full force of Keynesian economics is pulling down the economy.


Sutton summarizes:

So we find associations between Franklin D. Roosevelt, the Warburg family, and the Warburg-inspired central banking system ranging from childhood to Warburg's appointment as a key monetary adviser to FDR. We shall see later that it was Warburg who determined the final shape of the National Industrial Recovery Administration. On the other hand, the Warburg family and their Wall Street friends controlled the private monopoly money supply known as the Federal Reserve System and through the International Acceptance Bank exploited that monopoly for their own purposes.

Article I, Section 9 of the U.S. Constitution: "No State shall...make any Thing but gold and silver Coin a Tender in Payment of Debts...."


Remember that this was written in 1975. Ron Paul is warning us about the following: 

A constitutional challenge to the issue of Federal Reserve notes by a private banking monopoly, the Federal Reserve System, is overdue. Hopefully, the value of the dollar will not have to be reduced to zero, as the mark was in post-World War I Germany, before such a challenge is initiated and sustained by the Supreme Court of the United States.

Americans please wake up to this for I have five hungry mouths to feed!

Wall Street and FDR by Dr. Antony Sutton is available in its entirety at Reformed Theology.