Franklin Delano Roosevelt vs. the Banks:
Morgan's Fascist Plot, and How It Was Defeated
Part I

I--Introduction

The early summer of 1994 finds the American presidency under attack from British-directed forces on both sides of the Atlantic. The objective of the attack is not simply to remove the American President, Bill Clinton, from office, but to destroy the effective functioning of the institution of the presidency, the most powerful potential force for good in the world.

At the same moment, we sit on the edge of the greatest financial collapse in history. We have been treated to a parade of bankers and financial speculators, such as George Soros, individuals who are operatives of these same London financial interests, appearing before Congressional committees to beg for expansion of their looting policies and privileges. In the deepening crisis ahead, the American presidency is the only institution powerful enough to carry out the policies that might reverse humanity's plunge into a barbaric New Dark Age that will slaughter billions of human beings as we enter the new millennium.

Those who doubt that this is true need only look back to the time some 60 years ago, when the forebears of those British-linked forces now attempting to destroy our nation sought to plunge the depression-wracked United States into chaos, and to impose a fascist bankers' dictatorship.

The story of this plot, and how the institution of the presidency in the hands of Franklin Roosevelt defeated it--a story which was told in the daily Establishment press while it was unfolding--has today been wiped from our history. It is a story that must be told, for its lessons have great bearing on the events unfolding before us today.

The Setting

In the United States, with unemployment rising and bread lines growing, with factories shut and banks collapsing at a record pace, the bankers' own candidate, the man who had helped deliberately destroy the U.S. economy on behalf of this cabal, Herbert Hoover, has been sent to a crushing defeat in the November presidential elections by Franklin Delano Roosevelt, the former governor of New York.

Roosevelt, the cousin of the Anglophile agent and arch-racist who helped set the stage for the World War I, the evil Teddy Roosevelt, is, like the Morgans, or the Warburgs, or the Rockefellers, a member of the patrician class. But because he was a patrician, Roosevelt knew one of the secrets of political life known only to handful of truly powerful elites: He knew that policy was not made or controlled by the power brokers in the political parties. Policy, in fact, was dictated by this Anglo-American oligarchy, an international elite of powerful families that ruled above kings and above elected governments.

Since the 1876 Species Resumption Act, U.S. economic and credit policy had essentially been dictated from London. Since 1913, the main vehicle for the implementation of that policy had been the Federal Reserve, a private bank, established by British policy interests. Overseeing its operations was a club of private bankers: the Warburgs, the Meyers of Lazard Freres, Otto Kahn of Kuhn Loeb, the Harrimans of Brown Brothers, Harriman and J.P. Morgan, Jr. of the House of Morgan.

In this ``secret government'' which defined the parameters and often the details of critical policies, the House of Morgan held the most important portfolio, as the most important agent of Anglo-Venetian interests in the United States. The Morgan partners held directorships in 167 industrial concerns, banks, railroads, and utilities, and they controlled, through their banking relationships, the most important media in the United States, including The New York Times. And most importantly, the Morgans, along with the other merchant banks, controlled the public debt of the United States, in concert with the Federal Reserve.

This cabal was confident that there would be no effective counter-reaction, no organized defense of the principles of the American republic: The United States was to emerge from the depression a British-controlled police state, to be effectively brought back into the British Empire.

Roosevelt Becomes a Problem

Meanwhile, word began to leak out that the President-elect was considering a bold plan of action against the economic crisis, including a massive public works program. That was not what London had in mind, but as long as it were financed through the normal means, through dollar-denominated securities, backed by gold, there was a limit to the credit that was available.

Then, as 1932 passed into 1933, some other features of Roosevelt's ``thinking'' were leaked. He was thinking of ``doing something about gold,'' which was not yet elaborated. Early in January, Roosevelt allowed it to be leaked that he was thinking about having the Treasury take control of the Federal Reserve and operate it as a ``national bank.''

It was decided to deliver Roosevelt a message. It came in the form of a hail of bullets, fired at the President-elect as he concluded a short speech before a crowd of 10,000 at a Miami waterfront rally on Feb. 15. Five people on or near the bandstand were hit, although Roosevelt, miraculously, was not.

The man firing the shots, Giuseppe Zingara, a member of a Masonic lodge from New Jersey, was at first branded an ``anarchist.'' An FBI investigation concluded that he had acted alone, as a lone assassin. When Chicago Mayor Anton Cermak, who was wounded in the gunfire, died three weeks after the attack, it fed press speculation that he, not Roosevelt, had been the target. The press soon began reporting that various mob sources claimed, including Frank Nitti, then-boss of the Chicago mob, that Cermak was on a hit list. The popular television series, ``The Untouchables,'' recently presented the story of the attack as a mob hit on Cermak. Most U.S. history books do not talk of the assassination attempt, nor do most Americans know that it happened.

However, 1933 news accounts speak of the assassin's arm being deflected by a woman in the crowd. Her report was that the gun was aimed directly for Roosevelt, who was speaking from the seat of an open car. Had she not deflected his arm, Roosevelt would have been hit and likely killed.

It was reported at first that Zingara was a ``brick mason;'' still later, it was revealed that the would-be presidential assassin was a Freemason. The Scottish Rite of Freemasonry felt compelled to issue a pledge of loyalty to the new President and a condemnation of the assassination. Meanwhile, after Cermak's unexpected death in March, Zingara was swiftly sent to the electric chair and the story faded from the press.

Had the assassination been successful, the history of this century would have been dramatically different.

War With the "Money Changers"

As this occurred, there developed an accelerating banking panic, with runs on deposits and demand for gold, in part manipulated by the New York bankers and the sympathetic press. In mid-February, the bankers demanded that Roosevelt issue a statement saying that the United States would under no circumstances depart from the gold standard. Roosevelt refused and the bankers fumed. It was now becoming obvious that Roosevelt was indeed going to do something about gold. Hoover was reported to have remarked, ``My God! He is going off gold.''

The New York bankers made new demands: Massive new credits to guarantee bank deposits to be handled through the Fed and huge infusions of monies from the Reconstruction Finance Corporation. This would have required major new government debt financing, from which the bankers would reap profit, while giving them the ability to restrict and direct the credit available to Roosevelt even before the new Administration took power. Roosevelt refused to do anything until he took office, and he repeated that he would not give any guarantees about the gold standard.

On Wednesday, March 1, 1933, fifteen states and the District of Columbia suspended or restricted banking operations. On that day alone, the Federal Reserve Bank of New York lost $36 million of its gold reserves. The London-led assault on the dollar continued. As more states closed their banks, the Fed reported in its March 2 report a loss of more than $226 million in gold.

Roosevelt was meanwhile planning radical action. He dusted off a statute enacted during the war, the Trading with the Enemy Act, and was prepared to use it to both close all banks, including the Federal Reserve, while blocking the export of U.S. gold reserves. Word leaked out and he received calls from Hoover, and then from Morgan partner Thomas Lamont, urging that Roosevelt, along with Hoover, back the bankers-dictated program. As they spoke, another more than $116 million in gold was readied for shipment to London from the New York Fed.

On March 4, with the U.S. economy and financial system in a state of free fall, Franklin Roosevelt was inaugurated as President of the United States. He delivered his famous speech telling the American people ``we have nothing to fear but fear itself.''

While most people remember these lines, few remember what came immediately after them. The President of United States launched into a blistering attack on the ``money changers'' who composed the secret government.

Denying that the depression and its continuation was a natural calamity, Roosevelt stated:

``Plenty is at our doorstep, but a generous use of it languishes in the very sight of supply. Primarily this is because the rulers of the exchange of mankind's goods have failed through their own stubborness and their own incompetence, have admitted their own failure, and have abdicated. Practices of the unscrupulous money changers stand indicted in the court of public opinion, rejected by the hearts and minds of men.

``True, they have tried, but their efforts have been cast in a pattern of an outworn tradition. Faced by failure of credit, they have proposed only the lending of more money. Stripped of the lure of profit by which to induce our people to follow their false leadership, they have resorted to exhortations, pleading tearfully for restored confidence. They know only the rules of a generation of self-seekers. They have no vision, and where there is no vision, the people perish.

``The money changers have fled from their high seats in the temple of our civilization. We may now restore that temple to the ancient truths. The measure of the restoration lies in the extent to which we apply social values more noble than mere monetary profit.

``Happiness lies not in the mere possession of money; it lies in the joy of achievement, in the thrill of creative effort. The joy and moral stimulation of work no longer must be forgotten in the mad chase for evanescent profits. These dark days will be worth all they cost us if they teach us that our true destiny is not to be ministered unto but to minister to ourselves and to our fellow man.

``Recognition of the falsity of material wealth as the standard of success goes hand in hand with the abandonment of the false belief that public office and high political position are to be valued only by the standards of pride of place and personal profit; and there must be an end to a conduct in banking and in business which too often has given to a sacred trust the likeness of callous and selfish wrongdoing....''

There was polite, public acknowledgement of the speech from the ``money changers'' on Wall Street. Some bankers, mostly in the commercial banks such Chase and National City, hoped that Roosevelt was simply making impolite statements for rhetorical effect, to appeal to the populist anti-Wall Street element in the population. Others among this ilk, knew different. In private, especially in the House of Morgan, and across the Atlantic in London, there was outrage. ``Insolent bastard,'' Montagu Norman, the head of the Bank of England is said to have snarled.

On March 6, invoking the powers of the Trading with the Enemy Act, Roosevelt proclaimed a four-day bank holiday and placed an embargo on the withdrawal or transfer for export or domestic use of gold or silver. Violators were threatened with ten years' imprisonment and/or stiff fines. While reluctantly willing to support the bank holiday, Morgan and his ilk were furious about the gold embargo. They demanded that Roosevelt immediately repledge U.S. fealty to the gold standard. Roosevelt told them directly and had his spokesman tell the media: Of course, we are still on the gold standard, only you can't convert anything to gold!

There were some hasty discussions between Wall Street and their key man at the Fed, Eugene Meyer. He told Roosevelt and his Treasury Secretary William Woodin, himself close friends with Morgan partners, that the Fed was still of the opinion that the President had no power to close it down or to tell it what to do. In fact, even he, as a Federal Reserve governor, had no power to tell Fed branches such as in New York what to do. Roosevelt's direct reply is unrecorded, but it is said that he told Meyer that the Fed could stay open if it chose, but that he would have the governors arrested under the terms of the Trading with the Enemy Act. There was some back and forth between Meyer, New York, and Chicago. Meyer returned to the White House to tell Roosevelt that the Fed would be closed, by its own decision.

At this point, Roosevelt appeared on the edge of overturning entirely the secret government's control over the nation's banking system and credit. A group of advisers urged him to effectively abolish the Federal Reserve, nationalizing it and throwing out the private bankers. He could have taken back the power from the private bankers to print money in their Federal Reserve, placing it back in the hands of the U.S. Treasury, as the Constitution called for.

However, other advisers called for caution. They claimed that a total war against the bankers would leave the country in a shambles. These snakes within his administration, concentrated in the Treasury Department, called for a truce with Wall Street.

Behind this fight was the question of the control of public credit. The government, under the Constitution, has the power to create credit, and to issue that created credit through the banking system, to finance projects as it sees fit. This is a cornerstone of the American System of economics, established by our first Treasury Secretary Alexander Hamilton. Those credits can be converted to currency, through the use of the ``discount window'' of a national bank, of the type Hamilton created.

The British, in their subversion of the American System, sought to eliminate the power of government to create and direct credit, substituting instead the creation of indebtedness, through government borrowing, from the banking system, in the open market. In so doing, the bankers added usurious interest costs to the borrowing, further limiting the amounts that might be raised in this way. Acting through their private banker cabal, the British had reified this ``open market'' system of selling government securities, at great profit, through their creation of the private Federal Reserve Bank. By controlling the Fed, as a private bank, the British and their agents, like Morgan, were able to manipulate the creation of credit in the banking system by setting the effective rates between banks and for the price of government debt.

To the extent that Roosevelt and his closest and most trusted advisers understood this, they saw only that the power over U.S. credit was in the hands of a cabal of bankers headed by Morgan. And though they threatened several times to nationalize the Fed, this was mostly as a threat to pry loose credit. If they refused to ``loosen up,'' Roosevelt and his advisers threatened to take more drastic actions, including the issuing of direct government credits; but they backed off, partly under pressure of agents but also because of their own imperfect understanding of the basics of American System economics.

In this first confrontation, Roosevelt backed off a direct showdown with Wall Street, heeding the advice of Treasury Secretary Woodin. He chose to fight a more limited war, to restore confidence in a collapsed banking system, and to weaken the hold of Morgan on the nation's credit. Thus, he made a fatal mistake, from whose results we still suffer today.

The First Skirmishes

On March 8, the measure passed both Houses of Congress.

That same night, Roosevelt introduced and demanded passage of legslation that would cut salaries of government employees by $100 million and revise the entire federal and veterans pension system to save $400 million.

In a clever maneuver to help pass this latter package, which was called the ``Economy Reform Package,'' Roosevelt decided that it was time to modify the 1920 Volstead Act which had created the Prohibition Amendment. He called for the effective end of prohibition by allowing the sale of ``3.2'' beer. The House voted for it almost immediately; the Senate passed the economy package the next day and voted the day after for 3.2 beer, breaking the back of the so-called ``dry lobby'' that had helped keep the nation in Prohibition for 13 years, during the which the ``secret government'' sanctioned the creation of the vast armies of criminal syndicates.

Morgan and his fellow bankers stayed on the sidelines during the debate on the economy reform package. To salvage what they could, they used as their point person Sen. Carter Glass of Virginia, the Scottish Rite Freemason who had been the putative author of the Warburg-drafted Federal Reserve Act. Glass tried without success to tack on amendments strengthening the power of the Fed and forcing more banks to join. In the end, he pushed for the administration's banking bill, thinking that it would help in the shutting of state chartered banks, which he attacked as being run ``by little corner grocerymen.''

After the banks began reopening, Roosevelt realized that Glass and the New York banks were indeed going to use the banking bill to shut state-chartered banks, giving the New York banks greater control over the system. He ordered his troops in Congress to push through a bill that relaxed standards being applied to state chartered banks; it was passed through both houses and signed on March 13.

Some within the Morgan cabal still blamed Roosevelt's actions on his advisers, the so-called ``brain trust'' of university professors from Columbia and Cornell. But ultimately it was Roosevelt who made the policy decisions.

Said J.P. Morgan, Jr. to an associate, ``I believe we have underestimated this man.''

The Larger Battle

Earlier, Roosevelt had seen to it that allies in the Senate, working through its Banking Committee, had launched a highly publicized investigation of the practices and power of the New York commercial banks. In February, he used it to force the resignation of National City Bank's Charles Mitchell and the president of the bank's holding company, Hugh Baker. These two were leading allies of Morgan among commerical bankers. Mitchell's successor, James Perkins, immediately moved to separate the commercial deposit bank operations from its investment banking, to emphasize the banks' return to ``commercial banking.''

The Rockefellers' Chase National bank was next for the Senate probers. Its new head, Rockefeller brother-in-law, Winthrop Aldrich, announced the day following Perkins's action that Chase too was going to divorce its securities affiliate. While arguing for an increase in the power of the Fed, and calling for all commercial banks to be members, he demanded a legal divorce of all commercial and investment banking.

The bankers lobbied that the hearings be called off. But Roosevelt personally demanded that they continue. He asked his troops to turn their fire directly onto Morgan and his allies in Kuhn, Loeb and Dillon, Read.

Roosevelt had approved the committee's hiring as its special counsel Ferdinand Pecora, a former district attorney from New York with a reputation for fearlessness. Born in Sicily, Pecora grew up as a devout Catholic, who hated corruption of all kinds and stated that it was his belief that usury was a sin. While an assistant district attorney, Pecora had earned the wrath of both Tammany Hall and Wall Street for his probes of bank corruption and rackets, which resulted in his being passed over for promotion. In 1930, he was told that his services were no longer needed, and he went into private practice.

Pecora planned to place the most powerful people in Wall Street in ``the dock,'' and try them in a way that would have been impossible in court, given their ability to ``purchase'' justice.

``The presentation of this case,'' he told The New York Times May 21, as the Morgan hearings got underway, ``may involve a great many details, but no case is so complicated that there are more than two or three high spots. By emphasizing these in the presentation and subordinating the details, a true picture of the situation is given. This means that the counsel must proceed from conclusions which he has drawn from the investigation, but it is the duty of the jury to scrutinize those conclusions and weigh their adequacy. In this investigation, my jury is the senatorial committee and the final jury on the subject is public opinion.'' Pecora said he was not ``hunting heads,'' but ``seeking the truth.''

In the opening hearings on the commercial banks, Pecora had established that some of the most powerful bank officers, such as Mitchell of National City, and Albert Wiggin of Chase, had lied to their shareholders, manipulated stocks for their own benefits, and had made and taken profits beyond anything reasonable, without the least bit of concern for the national interest. Pecora had refused to allow them to be vague or evasive, and with his questioning, often made them look ridiculous. Public sentiment, aroused by Roosevelt's speech on ``the money changers'' who had destroyed the nation for their profit, now was further aroused with concrete evidence.

In early March, Pecora fired off a series of detailed and embarrassing questions about the operations of the House of Morgan and its relationship to other banks, corporations and clients. Morgan counsel, former Democratic Party 1924 presidential candidate and former ambassador to Great Britain, John W. Davis, declared the questions to be outrageous. But Morgan was forced ultimately to answer them, and then to submit to hearings in May and June that shook the foundations of the ``secret government.''

Pecora and his staff spent most of the months of February, March and April 1933 in New York, working from early morning until 6 p.m. in the offices of J.P. Morgan and Company, pouring over its records of financial dealings since the war. He told no one, with the possible exception of the White House, what he was looking for and what tack he would take, fearing that that information would be leaked back to Morgan through their agents on the Banking Committee like Glass.

On March 29, President Roosevelt sent to Congress his bill for the regulation of the sale of investment securities. In his message to Congress, Roosevelt continued his attack on the corrupt financial practices of the private banking houses and securities brokerages, as well as the commercial banks, which dealt in securities. The bill, he said, ``adds to the ancient rule of caveat emptor [let the buyer beware], the further doctrine, `Let the seller also beware.' It puts the burden of telling the whole truth on the seller.''

Wall Street led an energetic campaign in Congress to defeat this legislation, and what was finally enacted was a diluted version of the British Companies Act, drafted by British operative and later Supreme Court Justice Felix Frankfurter, that hardly threatened the private bankers.

On April 10, Roosevelt submitted the first of his massive public works programs: The legislation to create the Tennessee Valley Authority. It broke the 13-year deadlock over the Muscle Shoals development on the Tennessee River, but went much farther than any proposal previously submitted to Congress.

The utilities in most of the United States were controlled by Morgan-related interests; through the Depression they had kept rates high, to give returns to their investors and had thus, de facto, limited the supply of power available to the whole economy. No major new power facilities had been built since World War I.

Now Roosevelt proposed the massive distribution of cheap electric power, to be administered by the TVA. He further proposed that the TVA plan and direct the development of more than 640,000 square miles, providing for a complete system of flood control, reclamation of river lands and creation of decentralized agro-industrial communities, as well as the production of cheap fertilizer from nitrate plants to be powered by cheap TVA power. In his speech introducing the bill, he said that he planned to recommend similar development plans for the Columbia and Missouri River valleys.

Roosevelt's adversaries in the financial community viewed the President's huge infrastructural development projects as a life-and-death challenge to their own selfish interests.

The British Counterattack

On April 11, the first waves of the attack broke against the dollar. They grew in intensity over the next three days. The New York bankers asked through the Fed for a lifting of the gold embargo, to allow them to ship $10 million in gold to Holland and England. The New York agents of the British upped the ante: They asked for an additional $15 million in gold-shipment licenses. Roosevelt ordered part of the request granted. But the requests kept escalating.

At first, Roosevelt, sensing a British and Morgan operation, decided to defend the dollar. The White House received reports that speculators operating in Amsterdam were prepared to dump $125 million to depress the dollar. In the same six days, more than $100 million in U.S. gold supplies was sent abroad.

Roosevelt was forced to relent and accelerate his timetable: On April 19, he reinstituted the gold embargo, renouncing the gold standard, as well as accepting an amendment to the farm bill by Sen. Thomas of Oklahoma that gave the President certain powers to inflate the currency.

The domestic reaction was precisely what the Anglo-Venetian crowd had hoped for: Hysteria from the partisans of hard-money policies, backed by a mobilization of the ``sound money'' lobby against the administration. To soothe those who would listen, Roosevelt had pronouncements made that the gold standard had been renounced for ``domestic'' reasons. But for the most part, this fell on deaf ears. There was also the expected reaction from within the administration itself, with members of Roosevelt's cabinet arguing to keep the U.S. bound to gold and to the ``international system.'' Roosevelt was polite, but he would not be swayed.

When it became obvious what the decision would be, Budget Director Louis Douglas, another Morgan mole and a leading spokesman for ``sound money'' who would later be fired by Roosevelt, declared: ``This will be the end of western civilization.''

There had been no statement made about repayment of existing gold-backed government securities and notes. To make that announcement and formulate his actual policy on gold, Roosevelt was to await the start of the Morgan hearings by the subcommittee on banking and currency of the Senate Banking Committee.

Morgan Under Oath

As was to become clear in the Senate testimony of the days following, what Morgan meant by ``private banking'' were the unregulated financial manipulations of an oligarchical club, in which the rich and powerful were allowed to make enormous profits, and through which the House of Morgan was able to buy and sell not just securities, but to gain control of most of U.S. industry, was able to buy politicians and diplomats, and effectively controlled the most powerful banks in the U.S..

Wrote Pecora five years later in his book, Wall Street Under Oath, ``Undoubtedly, this small group of highly placed financiers, controlling the very springs of economic activity, holds more real power than any similar group in the United States.''

The meek response of the Morgan partners to these charges was that, while it might appear that they had control of many companies and banks, they were merely performing a ``service'' and exercised no control other than the ``power of argument and persuasion.''

Thomas Lamont, the partner who effectively managed the firm, told the committee that the common belief in the great power of the House of Morgan was ``a very strong popular delusion.'' All the firm did was offer advice, which its clients could take or leave. ``We are credited with having what is known as power or influence; and we admit that we hope that our counsels are of some avail in the certain directions in sound finance.''

On the very first day, it was revealed that J.P. Morgan, arguably the most powerful banker in the nation, and all the 20 partners in his Morgan and Company and its Philadelphia operation, Drexel and Co., had paid no income taxes in 1931 and 1932 and had paid only small amounts in previous years. Morgan defended himself, claiming that he had merely taken advantage of tax laws: ``If the laws are faulty, it is not my problem,'' he told the committee. It was also shown that the Internal Revene Service (IRS) had never examined Morgan transactions--anything that was prepared by the bank was simply passed on by the examiners without even a cursory glance!

At one point, Morgan expounded on how the Federal Reserve was effectively backed up by the U.S. government, even though it was a private bank. His boy, Carter Glass, was forced to rush to clarify this point, stating that even if Mr. Morgan perceived that the Federal Reserve was backed by the government and could draw upon its resources, it was indeed a private bank and the government had only the slimmest of supervisory powers over it. Morgan acknowledged his ``error and misstatement.''

Pecora fought to have various items entered on the public record: lists of companies in which Morgan partners held directorships, lists of banks on which they were directors, list of banks which held their deposits, and the firm's balance sheets for the previous three years.

Most shocking were the lists of ``preferred clients'' and friends of the bank, who had been let in at a below-market price on a major 1929 speculative stock offering. The list revealed two tiers of Morgan ``cronies.'' The first were true ``friends of the firm'' who were Morgan allies and operatives, and the second was a ``fishing list,'' by which they sought prospective new operatives, with whom they would deepen their relations. It showed that Morgan had effectively controlled those who made U.S. financial policy for more than three decades, as well as the leadership of both political parties, and much of the federal bench!

Pecora showed, and the partners confirmed, that Morgan handled one of the most confidential and critical aspects of British policy--the Bank of England's pound stabilization fund operations. This was handled, on this side of the Atlantic, by J.P. Morgan, Jr., personally, and his top henchman, Thomas Lamont. In London, the office of Morgan, Grenfell, from which two partners were members of the House of Lords, coordinated continental operations. The firm had also established $200 million in revolving credit for the British government, which was used to buy British securities and discount them in dollars at 4.5 percent.

A similar fund was set up to market $24 million in securities for Mussolini's fascist Italy (and an additional 5 million pounds sterling in securities), administered by Morgan Grenfell, and a syndicate of private bankers including Hambros and N.M Rothschild and Sons. Additional securities and currency accounts were set up with Morgan by the Fed, the Bank of England and Schacht's Reichsbank.

Morgan was thus shown to be the key instrument for carrying out international financial warfare and credit policy for British interests.

It was brought up that such operations might in fact be against the interests of the United States and some of the ``clients'' Morgan represented in the U.S.A. Morgan categorically denied this. Besides, the Morgan partners testified, this is just a matter of doing business, even when we represent foreign governments. When Pecora pointed out that members of the Morgan firm in London were members of the House of Lords and were even officials of the British government, Morgan and his partners blustered that there was a ``wall'' between business and politics. When Pecora pursued the issue, Morgan simply stated that there could be no conflict in policy between U.S. and British interests as such, and if there was such an ``absurd'' eventuality, the House of Morgan would behave as ``reliable bankers!''

The most pointed exchanges occurred when Pecora zeroed in on the fact that Morgan, which took deposits, did not have to submit to any of the regulations or audits of a regular commerical bank. At first, Morgan hid behind the limp argument that the bank was ``private,'' that it could only accept from someone recommended and it did not solicit business. Then, he brusquely attacked all bank regulation, stating that it was ``useless,'' that it hadn't kept banks from failing, and that he didn't see why he should have to put up with it. Morgan will never reveal its relations with its ``clients,'' he fumed. ``It is our business, and our business alone, and none of yours.''

In the several days of hearings, there were repeated exchanges between Pecora and Morgan allies on the committee, trying to blunt the damaging attack of the former prosecutor. This group, led by the Tory Glass, were mostly ``Dixiecrats'' and ``Southern Gentlemen'' who rose to defend the honor of ``Mr. Morgan'' and to charge that he was being badgered by Pecora, whom The New York Times repeatedly referred to as a ``swarthy,'' ``sweating'' man attacking the ``elegant'' and ``composed'' Morgan partners.

But on more than one occasion, even The Times was forced to admit that Morgan was feeling the heat and sweating under the glare of public scrutiny.

Glass, showing the fury that Morgan couldn't or didn't dare show, railed at Pecora on May 26, demanding to know what the purpose of his interrogations of these ``esteemed'' men and was demanding to know why the committee had not been briefed in advance on his line of questioning, presumably so that he, Glass, and his allies, could have put a stop to it before it began.

Pecora issued a spirited counterattack, stating that he was following the Senate resolution which gave powers to investigate securities and banking operations, for the purpose of ultimately allowing the Senate to make proposals as to what to do about them. ``And I want to add, I did not seek this assignment as counsel to this committee; I appreciated the honor and still appreciate the honor, the dignity and opportunity for service in having been asked to serve as counsel to this committee.

``I am happy to render whatever service I modestly could as counsel to the committee; and I want to assure Sen. Glass that the compensation of $255 a month which I am receiving for these services certainly is no incentive to me to render these services or to continue to render them,'' Pecora told the senators.

The transcript then reports that, in response to this statement, there was ``Applause in the room on the part of the spectators, loud and long continued.''

Effectively defeated, but still furious, Glass shot back: ``Oh yes, that is what it is all about. What we are having is a circus and all that is lacking is the peanuts and colored lemonade.''

Morgan, in one of the worst public relations gaffes on record, decided to take Glass's circus image to heart. He brought a female midget to the hearings and had her sit on the lap of J.P. Morgan, Jr., for a photo that appeared in papers around the world. The move got no sympathy, and spurred charges that now Morgan was manipulating even poor unfortunate midgets!

Throughout the country, even the Morgan-controlled press was forced to print the daily dispatches from the hearings. Given what was being said, given Morgan's attitude, it was impossible to edit them in such a way that could place Morgan in a favorable light. Meanwhile, there were calls for resignations of public figures who had been shown to be on Morgan's lists for ``insider'' stock offerings, including Treasury Secretary Woodin.

The New York Times meekly editorialized that there was nothing sensational in what was being revealed, that it was all ``old news.'' It even tried to praise Morgan for pointing up inadequacies in income tax law!

Wrote Pecora:

``The power of J.P. Morgan was not `a very strong popular delusion,' as Mr. Lamont would have it, but a stark fact. It was a great stream that was fed by many sources: by its deposits, by its loans, by its promotions, by its directorships, by its pre-eminent position as investment bankers, by its control of holding companies which, in turn, controlled scores of subsidiaries, and by its silken bonds of gratitude in which it skillfully enmeshed the chosen ranks of the `preferred lists.' It reached into every corner of the nation and penetrated into public, as well as business affairs. The problems raised by such an institution go far beyond banking regulation in the narrow sense. It might be a formidable rival to the government itself.''

To be continued.