FINAL WARNING: Financial Background
David F. Houston (who along with Glass, later became Treasury
Secretaries under Wilson), was given $100,000 to find locations for the
regional Reserve Banks. With over 200 cities requesting this status,
hearings were held in 18 cities, as they traveled the country in a
special railroad car.On October 25, 1914, the formal establishment of the Federal Reserve
System was announced, and it began operating in 1915.Col. House, who Wilson called his “alter ego,” because he was his
closest friend and most trusted advisor, anonymously wrote a novel in
1912 called Philip Dru: Administrator, which revealed the manner in
which Wilson was controlled. House, who lobbied for the
implementation of central banking, would now turn his attention
towards a graduated income tax. Incidentally, a central bank, providing
inflatable currency; and a graduated income tax, were two of the ten
points in the Communist Manifesto for socializing a country.It was House who hand-picked the first Federal Reserve Board. He
named Benjamin Strong as its first Chairman. In 1914, Paul M. Warburg
quit his $500,000 a year job at Kuhn, Loeb and Co. to be on the Board,
later resigning in 1918, during World War I, because of his German
connections.The Banking Act of 1935 amended the Federal Reserve Act, changing
its name to the Federal Reserve System, and reorganizing it, in respect
to the number of directors and length of term.Headed by a seven member Board of Governors, appointed by the
President, and confirmed by the Senate for a 14 year term, the Board
acts as an overseer to the nation’s money supply and banking system.The Board of Governors, the President of the Federal Reserve Bank in
New York, and four other Reserve Bank Presidents, who serve on a
rotating basis, make up the Federal Open Market Committee. This
group decides whether or not to buy and sell government securities on
the open market. The Government buys and sells government
securities, mostly through 21 Wall Street bond dealers, to create
reserves to make the money needed to run the government. The
Committee also determines the supply of money available to the