Follow the Yellow Brick Road (Part I)

Years ago the author of Quixotic Joust, Linda Minor, published a long, winding treatise about her analysis of the world based upon historical research she conducted. It was called "Follow the Yellow Brick Road: From Harvard to Enron," and was written shortly after the collapse of Enron stock.  What follows is an edited excerpt.

Part I: 
  From Cutthroat Competition,
to Charity, to World Government--
The Morgan Syndicate 

By Linda Minor ©2000

Professor Carroll Quigley states that the Rhodes Trust controlled huge amounts of capital which the trustees had the obligation to invest for the purposes set out in the Rhodes Will, including "the extension of British rule throughout the world ...[and] the ultimate recovery of the United States of America as an integral part of a British Empire." Such purposes required the utmost secrecy. 

Rhodes wrote his first Will in 1877 (final one written in 1899), so we know his goal was already in the working stages by those at Oxford who motivated him at the time. The ultimate trustees were close to Oxford University, having been ingrained with the same devotion to the perpetuation of the Empire, through chartered companies like Rhodes' British South Africa Company and Hudson's Bay Company, which returned a high percentage of profit to the British Government.[See Marvin Perry, Sources of the Western Tradition: Volume II: From the Renaissance to the Present.

The trustees of the Rhodes trust, who had control of Rhodes' gold and diamond mines, already had their eye on the oil that had been discovered in Pennsylvania in 1859. Eustace Mullins (whom we must be wary to take with a large grain of salt) in The Rockefeller Syndicate, wrote that the Rothschilds banks "controlled 95% of all railroad mileage in the United States, through the J.P. Morgan Company and Kuhn Loeb & Company." He wrote also the international banking empire then sent Jacob Schiff of Kuhn, Loeb & Co. (who sometimes operated as their agent) to John D. Rockefeller, who had ruthlessly acquired control of a great majority of American oil refineries; that they set up an elaborate rebate deal for Rockefeller, through a dummy corporation, South Improvement Company. These rebates ensured that no other oil company could survive in competition with the Rockefeller firm. Nothing, however, can be found to document Mullins' claims.

***
Investments were then made through secret nominees with the aim of acquiring control for the British Empire of what was then the most strategic resources throughout the world, including the old colonial empire in the Americas. Loans made to finance new business in the United States may have been conditioned on the borrower's agreement to set up a charitable foundation upon death or retirement, and the assets of the foundation would then be placed in the hands of trustees approved by the Rhodes group. Thus the trust would be administered in accordance with the goals set out by Rhodes in his will. This scheme was followed until after the end of World War I and the decade leading into the second World War. By that time Americans began to believe they could replace European investors with their own home-grown banking establishment, whose investments in the petroleum industry was superseding the need for foreign investments.

Thomas A. Scott

As it turns out, South Improvement Co. was a holding company scheme designed in 1871 by Pennsylvania Railroad magnate, Thomas A. Scott. South Improvement Company was a secret alliance between the railroads and a select group of large refiners aimed at stopping "destructive" price-cutting and restoring freight charges to a profitable level. According to the pact, the railroads would raise their rates, but would agree to pay rebates to Rockefeller and other large refiners, thus securing their steady business. In addition, the latter were to receive the proceeds of the "drawbacks" levied on nonmembers, who as a result would end up paying much higher prices for their shipments of oil. 

In April of 1872, the South Improvement Company's charter was repealed by the Pennsylvania legislature before it had even conducted a single transaction. Eager to consolidate the refining industry, Rockefeller set out to eliminate what he called "ruinous" competition from his most immediate rivals. In less than six weeks, between February and March of 1872, he used the threat of the big new alliance and a sophisticated range of tactics to buy up 22 of his 26 Cleveland competitors.

Scott was first-vice-president of the Pennsylvania Railroad Company in 1860, and served as president from 1874 until 1880. Scott's allies pushed through the Pennsylvania state legislature a series of bills creating the nation's first pure holding companies--two of which were the Pennsylvania Company and the Southern Railway Security Company. The Southern Railway Security Company held the stock of the southern feeder route for the Pennsylvania that Scott envisioned, to stretch from Washington, D.C. to the Mississippi River. The company had been purchased from James Roosevelt (FDR's father) in 1873--just seven years before Roosevelt married into the Delano family of "former" opium traders. 

Andrew Carnegie

Scott's assistant until 1865 was Andrew Carnegie, who left the Pennsylvania Railroad to start his own company, but who maintained his ties to the railroad. In 1875 Carnegie founded his first steel plant, the Edgar Thomson Works, in Braddock, Pennsylvania. The plant was named for the president of the Pennsylvania Railroad, which was his first customer; he made 2,000 steel rails for the Pennsylvania Railroad. 

In 1901 Carnegie sold his entire company to J.P. Morgan for $480 million, allowing Morgan to create US Steel. Morgan would have been acting in this transaction as an agent for investors, but we do not know whose money he used to purchase Carnegie's stock. With his proceeds from the sale Carnegie established the Carnegie Institution to provide research for American colleges and universities. 

Daniel Coit Gilman

The first president of Carnegie's new institution was Daniel Coit Gilman, trained at Norwich Academy, who had entered Yale in 1848, forming an intimate friendship with his fellow student, Andrew Dickson White. In 1852, had Gilman studied for a few months at Harvard College, living in the home of Prof. Arnold Guyot, a Swiss national educated in Berlin. Gilman and White sailed the following year to Europe as attachés of the American legation at St. Petersburg, Russia; he also spent the winter of 1855 in Germany. For the next seventeen years, his life revolved around Yale. 

According to Antony Sutton, Gilman's first task in 1856 was to incorporate Skull & Bones as a legal entity under the name of The Russell Trust. Gilman became Treasurer and William H. Russell, who had been the co-founder with Alfonso Taft (the father of president William Howard Taft) in 1832, became President. Russell received permission to form a chapter of the German secret society, while he was studying for a year in Germany.

Gilman became president of the University of California in 1872 and of Johns Hopkins University in Baltimore in 1875. As a result of the Panic of 1893, dividends were suspended on the common stock in the the Baltimore & Ohio Railroad (founded by George Brown of Baltimore), which stock composed the bulk of the university's endowment. The railroad was bought out of 1896 bankruptcy by the Pennsylvania Railroad. Gilman remained in Baltimore until the 1890s. It is interesting to note that the B&O was largely financed initially by Barings Bank, which issued 6% bonds worth 1 million pounds sterling before 1880. The B&O also sold 2 million pounds of its securities through J.S. Morgan's London office and almost that many more at a reduced price a few years later--still before 1880. Most of the B&O creditors, therefore, were British, and they demanded that the interest on the bonds be guaranteed by Barings and Morgan.

By March 1896, according to railroad financing historian, Dorothy R. Adler:

J.S. Morgan; Brown, Shipley; and Baring Brothers, Ltd. announced that they had agreed to cooperate to protect the British holders of securities issued through their houses [according to Burdett's].... On the other hand, the Economist commented on this announcement:

In many instances, however, the protection thus accorded to English holders of American railroad securities has been a very costly piece of business, and has materially added to the losses which the general proprietary bodies have had to sustain. Of course, we do not expect issuing houses to work for nothing, but there is a moral responsibility attaching to their position which should weigh with them, and induce them to use their best endeavours in the protection of the interests which they have helped to create, without reference to the fees to which their services may entitle them. And when these services are volunteered, there is all the more reason why their cost should be kept within moderate limits. [Source: Dorothy R. Adler, British Investment in American Railways: 1834-1898, p. 164.] 

A partial list of notable trustees of Andrew Carnegie's Institute, listed alphabetically, reveals the names of the most well-known men appointed. In 1910 Carnegie created another group called the Endowment for International Peace. This was a forerunner to Woodrow Wilson's vision of a League of Nations which eventually became the United Nations. The international problems to be settled were disputes over territory, claims and monetary crises presented to the businessmen who conducted trade across national boundaries. The names marked by an asterisk had participated in some way or inherited their wealth from trade in opium or the China trade:

Robert O. Anderson, 1976–1983; 
Robert S. Brookings, 1910–1929; 
Vannevar Bush, 1958–1971; 
*Frederic A. Delano, 1927–1949; 
Cleveland H. Dodge, 1903–1923; 
Simon Flexner, 1910–1914; 
*W. Cameron Forbes, 1920–1955; 
James Forrestal, 1948–1949; 
Hanna H. Gray, 1974–1978; 
*Henry L. Higginson, 1902–1919; 
Ethan A. Hitchcock, 1902–1909; 
Herbert Hoover, 1920–1949; 
*Henry Cabot Lodge, 1914–1924; 
Alfred L. Loomis, 1934–1973; 
Robert A. Lovett, 1948–1971; 
*Seth Low, 1902–1916; 
Andrew W. Mellon, 1924–1937; 
William W. Morrow, 1902–1929; 
Walter H. Page, 1971–1979; 
James Parmelee, 1917–1931; 
William Barclay Parsons, 1907–1932; 
John J. Pershing, 1930–1943; 
David Rockefeller, 1952–1956; 
Elihu Root, 1902–1937; 
Elihu Root, Jr., 1937–1967; 
William H. Taft, 1906–1915; 
William S. Thayer, 1929–1932; 
Juan T. Trippe, 1944–1981; 
Andrew Dickson White, 1902–1916.

When the stock market crashed in 1929, more than a decade after the the Federal Reserve System act was passed by Congress in 1913, the same year John Pierpont Morgan died, another group of financiers stepped in to buy up the major stockholders in the private banking system. Their actions would usher in a totally different emphasis on the direction the United States was to take in investment and in what "charities" would be rewarded in future years.