Oil is the New Gold
The pages of history bear witness to the rise and fall of countless dynasties and families, but few have left an indelible mark on the world stage like the Rockefellers. Spanning decades, this family has shaped the realms of finance, industry, and government. This article delves into the intricate tapestry of their history, exploring the origins, achievements, and enduring legacies that define the Rockefellers.
The Rockefeller family emerged as industry titans in the late 19th and early 20th centuries, spearheading the American oil revolution. Founded by John D. Rockefeller, Standard Oil became a behemoth that dominated the oil industry by creating an illegal monopoly. The family's wealth soared to unprecedented heights when the U.S. got involved and broke up the Oil Titan's empire through anti-trust laws. As a result, John D. Rockefeller became one of the wealthiest individuals in history.
However, having billions of dollars was not enough for John. Moreover, dealing with outside influences like politicians and finance regulators concerned Rockefeller to no end.
So, J.D. decided to look at the banking industry. It is important to note that individuals could start and own banks in the 1900s. Most importantly, they could be outside the billionaire class.
A Class Move
In 1907, a substantial bank collapse, often called the Panic of 1907 or the Knickerbocker Crisis, occurred. A series of bank runs, stock market declines, and overall financial panic characterized the crisis. Several factors contributed to the panic.
The Panic of 1907 highlighted the vulnerabilities in the U.S. financial system and underscored the need for reforms. The aftermath of the crisis contributed to the push for establishing a central banking system, leading to the creation of the Federal Reserve in 1913. The Federal Reserve's overall design was to provide a more effective response to financial panics and promote the stability of the banking and financial system. Does this sound familiar to the FTX Crypto crowd?
Trust (get it) Me
So, John D. Rockefeller and others wanted to stem the tide of unworthy bank owners (outsiders). Consequently, he had a considerable influence in creating the Federal Reserve. After the 1907 panic, Rockefeller testified before the House Banking and Currency Committee, investigating the Panic of 1907.
He argued that the lack of a central bank caused the panic and that a central bank was needed to provide a lender of last resort.In 1910, Rockefeller helped to found the National Monetary Commission. Coincidently, he also served on the commission's advisory council.
Most importantly, the National Monetary Commission's Advisory Council comprised eleven members who were experts in banking, finance, and economics. They provided the commission with advice on its studies and proposals. The members of the Advisory Council were:
A Stacked Deck
- Paul M. Warburg, banker, New York City (pay attention to this man)
- Frank A. Vanderlip, banker, New York City
- Jeremiah W. Jenks, professor of political economy, Cornell University
- Edwin R. A. Seligman, professor of economics, Columbia University
- David Kinley, professor of economics, University of Illinois
- James B. Forgan, banker, Chicago, Illinois
- Fred M. Taylor, director of the Bureau of Economic Research, Washington, D.C.
- Charles W. Elliott, president of the National Association of Manufacturers
- Oscar L. Strauss, former Secretary of Commerce and Labor
- Robert S. Lovett, former Assistant Secretary of the Treasury
The original Influencer
In 1911, Rockefeller wrote a letter to President William Howard Taft in which he urged Taft to support the creation of a central bank.
1913 Rockefeller testified before the Senate Banking and Currency Committee, considering the Federal Reserve Act. He argued that the Federal Reserve Act was necessary to reform the U.S. banking system and prevent future financial panics.
The Federal Reserve Bank of New York was created on December 23, 1913, by the Federal Reserve Act of 1913. President Woodrow Wilson signed the act into law in response to the financial panic of 1907, highlighting the need for a more stable and efficient national banking system.
Is the FED a government agency? No. Does the U.S. government have any input or control of the FED? No. How did the FED get funded? The initial funding for the 12 Federal Reserve Banks came from two primary sources:
Show me the Money!!!
Membership fees from banks: When the Federal Reserve System was created in 1913, all national banks were required to become members and purchase stock in their respective regional Federal Reserve Bank. This stock purchase provided the initial capital for the banks.
Gold certificates: The Federal Reserve Act also authorized the regional banks to acquire gold certificates from the U.S. Treasury. These gold certificates served as backing for the banks' notes and deposits.
Over time, the Federal Reserve Banks have accumulated additional funding through their operations, such as:
Interest on securities: The Federal Reserve Banks purchase U.S. Treasury securities and earn interest on these investments.
Fees for services: The Federal Reserve Banks charge fees for various services, such as check clearing and wire transfers.
Surplus earnings: The Federal Reserve Banks retain a portion of their surplus earnings each year. This retained surplus is a buffer against potential losses and allows the banks to invest in new technologies and infrastructure.
Just the Facts
Today, the Federal Reserve Banks are self-funded and do not rely on direct appropriations from the U.S. Treasury. However, they are still subject to oversight by the Federal Reserve Board of Governors and the U.S. Congress.
What was the initial total capital or dollar amount raised by the membership fees for the Federal Reserve? According to the Federal Reserve Bank of New York, the initial total capital raised by membership fees for the Federal Reserve System was approximately $92.4 million ($2.8B today) in 1914. This figure represents the sum of the stock purchases made by member banks in the twelve regional Federal Reserve Banks. As a result, that cash value today is worth $31B.
IT's Who you Know?
One last question. Who were the original men appointed to the Federal Reserve Board? President Woodrow Wilson appointed these men on March 4, 1914:
- Paul M. Warburg is a banker from New York City (Remember Me?).
- Adolph C. Miller: A member of the California State Railroad Commission.
- Charles S. Hamlin: An assistant professor of economics at Harvard University.
- Franklin K. Lane: The Secretary of the Interior.
- W. P. G. Harding is a banker from Birmingham, Alabama.
- Edward A. Alderman: The president of the University of Virginia.
- C. J. McFadden is a banker from Steubenville, Ohio.
The seven members of the Board were chosen to represent various geographical areas and economic interests. They were all experts in banking and finance, and they were all committed to the creation of a stable and efficient national banking system.
Arranged Marriage, Much
Most importantly, note the first name, Paul M. Warburg. Warburg was born in Hamburg, Germany, to the Warburg family, a German Jewish banking dynasty. His family owned the banking firm M. M. Warburg & Co. Moreover, he was later married to Nina J. Loeb, daughter of Solomon Loeb, a founder of the New York investment firm Kuhn, Loeb & Co., now known as Lehman Brothers.
Subsequently, Warburg was a member of the advisory council of the Federal Reserve Board from 1921-26, serving as president of the advisory committee in 1924–26. He was also a trustee of the Institute of Economics, now known as the Brookings Institution, serving until he died in 1932.
As a result, Brookings has contributed to the creation of the United Nations, the Marshall Plan, and the Congressional Budget Office, as well as to the development of influential policies for deregulation, broad-based tax reform, welfare reform, and foreign aid. Interesting.
Pills and Such
In addition, the Rockefellers' legacy extends beyond oil and banking magnate status. The family established the Rockefeller Foundation in 1913 (note the date) with an unwavering commitment to philanthropy. This foundation focuses on education, public health, and scientific research.
Consequently, the Rockefeller family has a long and extensive history in the pharmaceutical industry, dating back to the early 1900s. Through their various investments and philanthropic endeavors, they have played a significant role in shaping the development and distribution of pharmaceuticals worldwide.
Here are some notable examples of the Rockefeller family's involvement in the pharmaceutical industry:
Mind your Business
Standard Oil and Parke-Davis: In 1900, John D. Rockefeller's Standard Oil acquired a controlling interest in Parke-Davis (a subsidiary of Pfizer), a pharmaceutical company founded in 1866. Under Rockefeller's leadership, Parke-Davis expanded its operations and became a leading producer of pharmaceuticals, including adrenaline and antitoxins.
Rockefeller Foundation and Medical Research: The Rockefeller Foundation (read more here), established by John D. Rockefeller in 1913, has significantly contributed to medical research and pharmaceutical development. The foundation has directed the work of numerous scientists and institutions, leading to advancements in areas such as antibiotics, vaccines, and disease control.
Rockefeller University: Founded in 1901 by John D. Rockefeller, Rockefeller University is a leading biomedical research institution. The university has been responsible for groundbreaking discoveries in various fields, including immunology, molecular biology, and neuroscience.
Mind my Business
University of Chicago: Founded in 1890, Rockefeller donated $600,000 ($20M today) for academic operations and long-term endowment; John stipulated that the money be for the construction of buildings only. Moreover, he appointed Frederick T. Gates a trustee of The University of Chicago, the General Board of Education, and the Rockefeller Foundation. Each institution is directly responsible for medical education and the related certifications to be a medical doctor in the U.S.
Memorial Sloan-Kettering Cancer Center: Established in 1948 with funding from the Rockefeller family, Memorial Sloan-Kettering Cancer Center is a world-renowned cancer treatment and research facility. The center has made significant contributions to cancer research and treatment, including developing chemotherapy and immunotherapy.
Venrock Associates: Venrock Associates, a venture capital firm founded by the Rockefeller family in 1933, has invested in numerous pharmaceutical companies, including Genentech (a subsidiary of Roche [biotech]), Regeneron (their product VEGF-Trap effectively suppresses tumor growth), and Illumina (they serve 155 countries in the sequencing, genotyping, and understanding gene expression). As a result, these companies have developed treatments for various diseases, including cancer, heart disease, and diabetes.
WHO, Cares
According to the World Health Organization (WHO), the top five most costly diseases in the world today are:
- Cardiovascular diseases: Cardiovascular diseases, such as heart disease and stroke, are the leading cause of death globally, accounting for 17.9 million deaths in 2019. They are also the most expensive disease in terms of economic burden, costing an estimated $859 billion worldwide in 2019.
- Cancer: Cancer is the second leading cause of death globally, accounting for 9.9 million deaths in 2019. It is also one of the most expensive diseases, costing an estimated $816 billion worldwide in 2019.
- Chronic respiratory diseases: Chronic respiratory diseases, such as chronic obstructive pulmonary disease (COPD) and asthma, are the third leading cause of death globally, accounting for 5.9 million deaths in 2019. They are also a major economic burden, costing an estimated $604 billion worldwide in 2019.
Top 5
4. Alzheimer's disease and other dementias: Alzheimer's disease and other dementias are the fifth leading cause of death globally, accounting for 5.5 million deaths in 2019. They are also a considerable economic burden, costing an estimated $329 billion worldwide in 2019.
5. Diabetes mellitus: Diabetes mellitus is the seventh leading cause of death globally, accounting for 1.5 million deaths in 2019. It is also a substantial economic burden, costing an estimated $327 billion worldwide in 2019.
These diseases significantly burden individuals, families, and healthcare systems worldwide. Subsequently, providing acute care is a significant revenue generator for these companies. However, I find it interesting that no investment in nutritional training is present in our premed and post-medical training.
According to a 2021 survey of medical schools in the U.S. and U.K., the average medical student receives approximately 60 hours of dedicated pharmacology instruction. Likewise, they receive 11 hours of nutrition training throughout their entire medical program.
Read all About It!
In conclusion, the Rockefellers represent diverse influence, power, and legacy facets. From pioneering industrial endeavors, shaping the finance landscape, creating U.S. policy, and promoting philanthropy, this family has impacted the world significantly. The common thread that binds their pursuits is the ability to wield influence, navigate challenges, and leave an indelible mark on history.
I share the Rockefellers' story as narratives of what one person with a drive can accomplish in one lifetime. You are no different; only this time, we can move forward without fear.
