In 1908, Congress passed the Aldrich-Vreeland Act which, basically, accomplished two objectives. First, it authorized the nationalbanks to issue an emergency currency, called script, to substitutefor regular money when they found themselves unable to pay theirdepositors. Script had been used by the bank clearing housesduring the panic of 1907 with partial success, but it had been a boldexperiment with no legal foundation. Now Congress made it quitelegal and, as Galbraith observed, "The new legislation regularizedthese arrangements. This could be done against the security ofsundry bonds and commercial loans—these could, in effect, beturned into cash without being sold."3
1. Moody, pp. 117-18,150
2. Kolko,
3. This legalized script was used only once—in 1914 at the outbreak of World War I. See Galbraith, p. 120.
COMPETITION IS A SIN
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The second and perhaps most important feature of the Act wasto create a National Monetary Commission to study the problemsof American banking and then make recommendations to Congresson how to stabilize the monetary system. The commissionconsisted of nine senators and nine representatives. The Vice-Chairman was Representative Edward Vreeland, a banker from theBuffalo area. The chairman, of course, was Senator Nelson Aldrich.
From the start, it was obvious that the Commission was a sham.
Aldrich conducted virtually a one-man show. The so-called fact-finding body held no official meetings for almost two years whileAldrich toured Europe consulting with the top central bankers ofEngland, France, and Germany. Three-hundred thousand tax dollars were spent on these junkets, and the only tangible product ofthe Commission's work was thirty-eight massive volumes of thehistory of European banking. None of the members of the Commission were ever consulted regarding the official recommendationsissued by Aldrich in their name. Actually, these were the work ofAldrich and six men who were not even members of the Commission, and their report was drafted, not in a bare Congressionalconference room in Washington, but in a plush private huntingresort in Georgia.
And this event finally brings us back to that cold, blustery nightat the New Jersey railway station where seven men, representingone-fourth of the wealth of the world, boarded the Aldrich privatecar for a clandestine journey to Jekyll Island.
THE JEKYLL ISLAND PLAN
As summarized in the opening chapter of this book, thepurpose of that meeting was to work out a plan to achieve fiveprimary objectives:
