HERBERT LEHMAN
The newest name in the international financial hierarchy is Herbert Lehman. Of 106 firms which founded the New York Cotton Exchange in 1870, only two survived to 1940, Lehman Brothers and Hentz and Company. Hentz and Company was taken over by the Baruch Brothers in 1917 when it became inadvisable to continue the firm of Baruch Brothers, bankers, since Bernard Baruch was entering public service. Anna Rochester wrote in 1935 that the banking leadership of Kuhn, Loeb Co. was being replaced by the more progressive methods of Lehman Brothers. 1935 was the year of the Nye Committee investigation of profiteers and munitions-makers in the First World War. The Duponts were made the scapegoats of that investigation, the purpose being to frighten Congress into accepting without amendment all of Baruch’s plans for controlling this country during the Second World War. In a series of lectures to the Nye Committee, he outlined, step by step, the draft, rationing of food and essential wartime materials such as oil and rubber, in which he had large interests, the cost-plus manufacturing system, price control, and the corporate excess profits tax system. The Baruch plans were followed minutely in setting up the military dictatorship which ruled this country from 1940 to 1945.
Chairman Lister Hill of the Nye Committee stated on January 28, 1937, that:
“We are very fortunate in having with us this morning as our witness Mr. Bernard Baruch. As you gentlemen will recall, Mr. Baruch was the Chairman of the War Industries Board set up by Woodrow Wilson during the First World War. It can be said without exaggeration that there is no man in the country who has given more time, more thought, to the subject of taking the profits out of war than Mr. Baruch.”
Whether Chairman Hill was being witty, we cannot say, but certainly Mr. Baruch had taken as many profits out of war as anybody in this country. As mentioned earlier, Baruch had started a phony peace rumor in 1918 which netted him a profit of $750,000 in one day on stock in United States Steel. In 1935, at the Nye Committee Hearings, Mr. Baruch had testified that:
“All wars are economic in their origin.”
Other interesting statements of Mr. Baruch are given in the following extracts from the Committee Hearings:
“If the Germans had been smart enough, we could not have won that war. There was 35% of the nitrates we could not get. There was a great battle between the two economic systems as to which would get the product. We had the gold which we would promise the Chilean government. We promised that we would give them the gold within six months after the signing of the treaty of peace. We earmarked the gold in our Treasury for them on the condition that they would do certain things. We were able in that way to get what we wanted in the way of nitrates.
MR. FADDIS: Do you think section 5 of your proposal is broad enough to include control of the conscientious objectors we would have in time of war? There is a group which seems to be growing a great deal.
MR. BARUCH: Your draft act would have to take care of that. That is one of the things you would have to set up.
MR. COSTELLO: The thought I had was the possibility of the conscientious objector being compelled to take part in some useful occupation.
MR. BARUCH: He works or fights. We will put him in something that is useful.”
In 193S, here were the representatives of the people of the United States calmly discussing the dictatorship they were going to set up over their own people. Again Mr. Baruch at the Nye Committee hearings:
MR. BARUCH: “The President (Wilson) one time gave me a letter authorizing me to take over any industry or plant. There was Judge Gary, President of United States Steel, whom we were having trouble with, and when I showed that to him, he said, ‘I guess we will have to fix this up’, and he did fix it up. You gentlemen will have your ceiling on prices to start with, and you can commandeer any plant during the war.”
Miss Jeanette Rankin commented, during the Nye Hearings, that:
“It is perfectly possible to take the profits out of war, but it is not possible to take the profits out of war by any of the schemes that you rich men suggest, and you haven’t had any proposals for taking the profits out of war from the poor men.”
The Nye Committee Hearings proved that Congress already considered our participation in the Second World War an inevitability as early as 1935, although we were supposedly at peace with the world.
Mr. Baruch also stated that:
“Money would be mobilized the same as men and materials, because a price would be fixed at which money could and should be used. I was one of the first who suggested the fixing of prices in the World War, but I do not think you can fix prices and distribution in peacetime.”
It may now begin to dawn what all this has to do with the Federal Reserve System. The Federal Reserve System is a central bank whose biggest job is war finance. Its connection with Wall Street brings us back to the public career of Herbert Lehman.
Mayer and Babette (Neugass) Lehman had three sons. Arthur went to Harvard, Irving went to Columbia, and Herbert went to Williams. When they finished college, they entered the family banking house of Lehman Brothers, New York, where they learned the intricacies of world finance, in which their firm played such an important part. Herbert learned, for instance, that the Russian economy was the economy of the future, and he learned that the American economy needed a lot of the improvements they were developing in Russia. Herbert Lehman now has more than twenty years of public service behind him.
He was a Colonel on the Army’s General Staff during the First World War, a strange place to find a man who had had no military training or experience. He was Lieutenant-Governor and Governor of New York, Military Governor of Italy in 1944 and 1945, head of the United Nations Recovery and Relief Association after the Second World War, and presently Senator of the United States from New York.
“Who’s Who in American Jewry” for the year 1928 lists Herbert Lehman as a director of many important corporations, a partial list of which is given here:
Abraham & Straus Department Store (a Rothschild enterprise); County Trust Company of New York; Jewel Tea Company; Van Raalte Company; Kelsey-Hayes Wheel Company; Pierce Oil Corporation; Spear Company; Studebaker Corporation; Franklin Simon Company; Robert Reis and Company; General American Investors, Limited; Knott Hotels; Fidelity Trust Company; and vice-president of the Palestine Economic Corporation, organized for the industrial development of Palestine. In this work he has been helped most by Edmund M. M. Warburg, director of the Jewish Telegraphic Agency, and General Chairman of the United Jewish Appeal.
In 1939, Congressman Jerry Voorhis of California had begun to ask questions as to why the Government didn’t own the Federal Reserve Banks. According to his autobiography, Roosevelt asked him to come over to the White House, and they talked, and Roosevelt said that it seemed to him that it was time they got around to taking over those Federal Reserve Banks, which were now worth $45 billion, as compared to the $143 million they had started with.
The next day Roosevelt’s secretary called Jerry Voorhis and told him he had better forget about that conversation, because they would not be able to do it for awhile.
The trouble was that the second World War was coming up, and we needed that privately owned central bank to take care of financing the war. Einzig remarks, in “World Finance, 1939-40,” Macmillan’s, that:
“The transition from ‘peace finance’ to ‘war finance’, in comparison with the hurried change of 1914, was carried through in 1939 without any major disturbances.”
There were no major disturbances because the years between the two World Wars had been years during which the great central banks secured and consolidated control of the world’s money and credit. The Federal Reserve System had wiped out all opposition in the Great Depression, and there were numerous organizations which facilitated exchange of information and cooperation between the central banks. First there was the League Finance Committee of the League of Nations, then there was the Bank for International Settlements at Basle, Switzerland, more popularly known as “the central bankers’ club”, and there were the periodic Economic Conferences at which the central bankers gathered to discuss their control of the world.
During American participation in the Second World War, the Federal Reserve System, besides its normal duties of war finance, took on several new totalitarian controls, one of the most important being the administration of consumer credit, that is, deciding what the worker is going to spend his salary on.
Governor Marriner Eccles testified at the Senate Hearings on the Office of Price Administration in 1941 that:
“The Federal Reserve Board has acted in consultation with Mr. Henderson’s staff. (Leon Henderson, government economist, was appointed by Roosevelt as head of the Office of Price Administration during the war). He is greatly interested in this question of consumer credit for the reason that control of the consumer installment credit is a very important power to the principal control of credit. During the last war there was a shortage of funds, and all during that war we were tied to a gold standard to such an extent that we let the gold standard determine our ability to finance. We have learned a good deal since. When the war was over, the Federal Reserve System forced a contraction of credit through a monetary policy (causing the Agricultural Depression of 1920-21), which, of course, could not do other than force a great sale of Government securities (at this point discussion off the record, as it frequently was when certain financial matters were being discussed). You have to protect the market price of Government securities. The interest rate and the money market are artificial things. New York is the only money market you have.
MR. SMITH: The cost of the gold purchases is not reflected anywhere in the books of the Treasury, so that it enters directly into the public debt structure?
ECCLES: That is correct.
MR. PATMAN: Governor Eccles, when did the Federal Reserve System start charging the Government agencies a service charge?
ECCLES: I really could not say.
MR. PATMAN: Wasn’t it intended when the Federal Reserve Act was passed that the Federal Reserve bank would render this service without charge — since under the Act the Government would give them the use of the Government’s credit free?
ECCLES: I wouldn’t think so.”
Emmanuel Goldenweiser writes of the Board during this time:
“During the war, quantitative controls were abandoned in order to support government finance.” That is, war finance.
The Second World War also gave the big bankers who owned the Federal Reserve System a chance to unload on the country billions of dollars printed early in 1930, in the biggest counterfeiting operation in history, all legalized by Roosevelt’s government, of course. Henry Hazlitt writes in the January 4, 1943 issue of Newsweek Magazine:
“The money that began to appear in circulation a week ago, December 21, 1942, was really printing press money in the fullest sense of the term, that is, money which has no collateral of any kind behind it. The Federal Reserve statement that ‘The Board of Governors, after consultation with the Treasury Department, has authorized Federal Reserve Banks to utilize at this time the existing stocks of currency printed in the early thirties, known as ‘Federal Reserve Banknotes’. We repeat, these notes have absolutely no collateral of any kind behind them.”
Governor Eccles also testified to some other interesting matters of the Federal Reserve and war finance at the Senate Hearings on the Office of Price Administration in 1944:
“The currency in circulation was increased from seven billion dollars in four years to twenty-one and a half billion. We are losing some considerable amounts of gold during the war period. As our exports have gone out, largely on a lend-lease basis, we have taken imports on which we have given dollar balances. These countries are now drawing off these dollar balances in the form of gold.
MR. SMITH: Governor Eccles, what is the objective that the foreign governments are after in this projected program whereby we would contribute gold to an international fund?
GOVERNOR ECCLES: I would like to discuss OPA, and leave the stabilization fund for a time when I am prepared to go into it.
MR. SMITH: Just a minute. I feel that this fund is very pertinent to what we are talking about today.
MR. FORD: I believe that the stabilization fund is entirely off the OPA and consequently we ought to stick to the business at hand.”
The Congressmen never did get to discuss the Stabilization Fund, another setup whereby we would give the impoverished countries of Europe back the gold which had been sent over here. In 1945, Henry Hazlitt, commenting, in Newsweek of January 22, on Roosevelt’s annual budget message to Congress, quoted Roosevelt as saying:
“I shall later recommend legislation reducing the present high gold reserve requirements of the Federal Reserve Banks.” Hazlitt pointed out that the reserve requirement was not high, it was just what it had been for the past thirty years. Roosevelt’s purpose was to free more gold from the Federal Reserve System and make it available for the Stabilization Fund, later called the International Monetary Fund, part of the World Bank for Reconstruction and Development, the equivalent of the League Finance Committee which would have swallowed the financial sovereignty of the United States if the Senate had let us join it. Consequently, the American people suffered the Great Depression as a result of not joining the League of Nations.