19

was to be represented in the board of directors, it was to have full 

knowledge of all the Bank’s,

affairs, but a majority

__________________________

5 Clarendon, Hist. Reb. 1647

5 

of the directors were to be chosen, directly or indirectly, by the 
banks of the association."6

Thus the proposed Federal Reserve Bank was to be "controlled by 
Congress" and answerable to the government, but the majority of 
the directors were to be chosen, "directly or indirectly" by the banks 

of the association. In the final refinement of Warburg’s plan, the 
Federal Reserve Board of Governors would be appointed by the 

President of the United States, but the real work of the Board would 

be controlled by a Federal Advisory Council, meeting with the 
Governors. The Council would be chosen by the directors of the 

twelve Federal Reserve Banks, and would remain unknown to the 
public.

The next consideration was to conceal the fact that the proposed 
"Federal Reserve System" would be dominated by the masters of 

the New York money market. The Congressmen from the South and 
the West could not survive if they voted for a Wall Street plan. 

Farmers and small businessmen in those areas had suffered most 
from the money panics. There had been great popular resentment 
against the Eastern bankers, which during the nineteenth century 

became a political movement known as "populism". The private 

papers of Nicholas Biddle, not released until more than a century 

after his death, show that quite early on the Eastern bankers were 
fully aware of the widespread public opposition to them.

Paul Warburg advanced at Jekyll Island the primary deception 
which would prevent the citizens from recognizing that his plan set 
up a central bank. This was the regional reserve system. He 

proposed a system of four (later twelve) branch reserve banks 

located in different sections of the country. Few people outside the 
banking world would realize that the existing concentration of the 

nation’s money and credit structure in New York made the proposal 

of a regional reserve system a delusion.