Creature From Jekyll Island by G. Edward

A. Not at all. They lend it to

customers.

A. You can't really say that.

Q. Then they haven't got it?

Q. But you've just said it. If I put

$100 into my account the bank is

A. No.

liable to have to pay it back, so

Q. Then how is it Assets?

it's Liabilities. But they go and

lend it to someone else, and he is

A. They maintain that it would liable to have to pay it back, so be if they got it back.

it's Assets. It's the same $100,

Q. But they must have some isn't it?

money in a safe somewhere?

A. Yes. But...

v

Q. Then it cancels out. It means, A. They wouldn't like you to doesn't it, that banks haven't draw it out again.

really any money at all?

Q. Why not? If I keep it there

A. Theoretically....

you say it's a Liability. Wouldn't

Q. Never mind theoretically. they be glad if I reduced their And if they haven't any money, Liabilities by removing it?

where do they get their A. No. Because if you remove it

Reserves of $249,000,000 or they can't lend it to anyone else.

thereabouts?

Q. But if I wanted to remove it

A. I told you. That is the money they'd have to let me?

they have made.

A. Certainly.

Q. How?

A. Well, when they lend your Q. But suppose they've already $100 to someone they charge lent it to another customer?

him interest.

A. Then they'll let you have

Q. How much?

someone else's money.

A. It depends on the Bank Rate. Q. But suppose he wants his too Say five and a-half per cent. ... and they've let me have it?

That's their profit.

A. You're being purposely ob-

Q. Why isn't it my profit? Isn't it tuse.

my money?

Q. I think I'm being acute. What

A. It's the theory of banking if everyone wanted their money practice that...

at once?

Q. When I lend them my $100 A. It's the theory of banking why don't I charge them inter-practice that they never would.

est?

Q. So what banks bank on is not

A. You do.

having to meet their commit-

Q. You don't say. How much?

ments?

A. It depends on the Bank Rate. A. I wouldn't say that.

Say half a per cent.

Q. Naturally. Well, if there's

Q. Grasping of me, rather?

nothing else you think you can

A. But that's only if you're not tell me...?

going to draw the money out A. Quite so. Now you can go off again.

and open a banking account.

Q. But of course, I'm going to Q. Just one last question.

draw it out again. If I hadn't

wanted to draw it out again I A. Of course.

could have buried it in the gar-

Q. Wouldn't I do better to go off

den, couldn't I?

and open up a bank?

vi

Section I

WHAT CREATURE

IS THIS?

What is the Federal Reserve System? The answer

may surprise you. It is not federal and there are

no reserves. Furthermore, the Federal Reserve

Banks are not even banks. The key to this riddle is

to be found, not at the beginning of the story, but

in the middle. Since this is not a textbook, we are

not confined to a chronological structure. The

subject matter is not a curriculum to be mastered

but a mystery to be solved. So let us start where

the action is.

Chapter One

THE JOURNEY TO

JEKYLL ISLAND

The secret meeting on Jekyll Island in Georgia at

which the Federal Reserve was conceived; the

birth of a banking cartel to protect its members

from competition; the strategy of how to convince

Congress and the public that this cartel was an

agency of the United States government.

The New Jersey railway station was bitterly cold that night.

Flurries of the year's first snow swirled around street lights.

November wind rattled roof panels above the track shed and gave a long, mournful sound among the rafters.

It was approaching ten P.M., and the station was nearly empty except for a few passengers scurrying to board the last Southbound of the day. The rail equipment was typical for that year of 1910, mostly chair cars that converted into sleepers with cramped upper and lower berths. For those with limited funds, coach cars were coupled to the front. They would take the brunt of the engine's noise and smoke that, somehow, always managed to seep through unseen cracks. A dining car was placed between the sections as a subtle barrier between the two classes of travelers. By today's standards, the environment was drab. Chairs and mattresses were hard. Surfaces were metal or scarred wood. Colors were dark green and gray.

In their hurry to board the train and escape the chill of the wind, few passengers noticed the activity at the far end of the platform. At a gate seldom used at this hour of the night was a spectacular sight. Nudged against the end-rail bumper was a long car that caused those few who saw it to stop and stare. Its gleaming black paint was accented with polished brass hand rails, knobs, frames, and filigrees. The shades were drawn, but through the open door, one could see mahogany paneling, velvet drapes, plush 4