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.However, therelationship between First National Bank of Chicago and these NewYork banks was even closer than these listings indicate.On page 701 of The Growth of Chicago Banks by F.Cyril James, wefind mention of "the First National Bank of Chicago s profitableconnection with the Morgan interests.A goodwill ambassador washastily sent to New York to invite George F.Baker to become a directorof the First National Bank of Chicago."31 (J.B.Forgan to Ream, January7, 1903.) In effect, Baker and Morgan had personally chosen the firstpresident of the Federal Advisory Council.James B.Forgan (1852-1924) also shows the obligatory "LondonConnection" in the operation of the Federal Reserve System.Born in St.74Andrew s, Scotland, he began his banking career there with the RoyalBank of Scotland, a correspondent of the Bank of England.He cameto Canada for the Bank of British North America, worked for the Bankof Nova Scotia, which sent him to Chicago in the 1880 s, and by 1900he had become president of the First National Bank of Chicago.Heserved for six years as president of the Federal Advisory Council, andwhen he left the council, he was replaced by Frank O.Wetmore, whohad also replaced him as president of the First National Bank ofChicago when Forgan was named chairman of the board.Representing the New York Federal Reserve district on the first FederalAdvisory Council was J.P.Morgan.He was named chairman of theExecutive Committee.Thus, Paul Warburg and J.P.Morgan sat inconference at the meetings of the Federal Reserve Board during thefirst four years of its operation, surrounded by the other Governors andmembers of the council, who could hardly have been unaware thattheir futures would be guided by these two powerful bankers.Another member of the Federal Advisory Council in 1914 was Levi L.Rue, representing the Philadelphia district.Rue was president of thePhiladelphia National Bank.Rand McNally Bankers Directory of 1914listed as principal correspondent of the First National Bank of New York,__________________________31 F.Cyril James, The Growth of Chicago Banks, Harper, New York,1938.42the Philadelphia National Bank.First National Bank of Chicago alsolisted Philadelphia National Bank as its principal correspondent in75Philadelphia.The other members of the Federal Advisory Councilincluded Daniel S.Wing, president of the First National Bank of Boston,W.S.Rowe, president of the First National Bank of Cincinnati, and C.T.Jaffray, president of the First National Bank of Minneapolis.These wereall correspondent banks of the New York "big five" banks whocontrolled the money market in the United States.Jaffray had an even closer connection with the Baker-Morganinterests.In 1908, to reinvest the large annual dividends from their FirstNational Bank of New York stock, Baker and Morgan set up a holdingcompany, First Security Corporation, which bought 500 shares of theFirst National Bank of Minneapolis.Thus Jaffray was little more than awage-earning employee of Baker and Morgan, although he had been"selected" by stockholders of the Federal Reserve Bank of Minneapolisto represent their interests.First Security Corporation also owned 50,000shares of Chase National Bank, 5400 shares of National Bank ofCommerce, 2500 shares of Bankers Trust, 928 shares of Liberty NationalBank, the bank of which Henry P.Davison had been president when hewas tapped to join the J.P.Morgan firm, and shares of New York Trust,Atlantic Trust and Brooklyn Trust.First Security concentrated on bankstocks which rapidly appreciated in value, and paid handsome annualdividends.In 1927, it earned five million dollars, but paid theshareholders eight million, taking the rest from its surplus.Another member of the initial Federal Advisory Council was E.F.Swinney, president of the First National Bank of Kansas City.He wasalso a director of Southern Railway, and lists himself in Who s Who as"independent in politics".76Archibald Kains represented the San Francisco district on the FederalAdvisory Council, although he maintained his office in New York, aspresident of the American Foreign Banking Corporation.After serving as a Governor of the Federal Reserve Board from 1914-1918, Paul Warburg did not request another term.However, he was notready to sever his connection with the Federal Reserve System whichhe had done so much to set up and put into operation.J.P.Morganobligingly gave up his seat on the Federal Advisory Council, and forthe next ten years, Paul Warburg continued to represent the FederalReserve district of New York on the Council.He was vice president ofthe council 1922-25, and president 1926-27.Thus Warburg remainedthe dominant presence at Federal Reserve Board meetings throughoutthe 1920s, when the European central banks were planning the greatcontraction of credit which precipitated the Crash of 1929 and theGreat Depression.43Although most of the Federal Advisory Council s "advice" to the Boardof Governors has never been reported, on rare instances a fewglimpses into its deliberations were afforded by brief items in The NewYork Times.On November 21, 1916, The Times reported that the FederalAdvisory Council had met in Washington for its quarterly conference."There was talk about absorbing Europe s extension of credit to SouthAmerica and other countries.Federal Reserve officials said that tomaintain a position as one of the world s bankers the United Statesmust expect to be called upon to render a good deal of the serviceperformed largely by England in the past, in extending short term77credits necessary in the production and transportation of goods of allkinds in the world s trade, and that acceptances in foreign traderequire lower discounts and the freest and most reliable gold markets."(The First World War was at its zenith in 1916 [ Pobierz całość w formacie PDF ]