By guest author, diogenes (bio below).











Fabrication  [2.1]

In the generation following the Civil War financial interests centered in New York City seized control of the American economy and transformed its distribution of wealth from one in which the richest 2% held 5% of the national wealth, into the one revealed by the Census of 1890 and fundamentally unaltered today.  The classic example of how corporate finance accomplished this occurred when the investment banking firm of J.P. Morgan, master builder of this system, melded America’s principal steelmaking companies, themselves compounded by mergers, 29 in all, to forge U.S. Steel, Incorporated, on a scale sufficient to dominate American steel production nationwide, control the market and set prices throughout the 20th century and beyond.

“Later [1911] the Federal Bureau of Corporations estimated that the tangible value of the property of the corporation in 1901, the year of its establishment, was $682 million, against which $1.4 billion in stocks and bonds had been issued.”  U.S. Steel was “heavily overcapitalized. … All of the common stock and two-thirds of the preferred [stock] represented nothing but speculation, promoters’ profits and capitalization of prospective earnings.”  That is, it was a tissue of financial paper, a species of legalized counterfeiting or bookmaking (“capitalization”), backed solely by the hopeful prospect of a successful conspiracy in restraint of trade to control the market for a key industrial necessity and charge a toll, to be extracted in elevated prices from every purchaser of steel products in perpetuity and paid as dividends to investors — as it still is.

The incorporation of U.S. Steel was climatic but typical of the fabrication of the American corporate economy — a complex of hundreds of such arrangements constructed over the past four generations.  J. Pierpont Morgan and his son Jack presided over the incorporation and financial fortunes of ATT, ITT, General Mills, Western Union, International Harvester, GE, GM, RCA, Standard Brands and dozens of other major corporations.  The customers of Comcast and Verizon (both ATT owned) pay broadband rates many times higher than South Koreans in the footsteps of the customers of U.S. Steel and all the others.

The creation by financial instruments of this paper tissue of fictitious wealth is an essential element of the fabric of the American economy and central to its operations.  The legal basis that enables this system’s existence and operations is laid down in business, corporate and financial laws — legislation written, with little regard for the public interest or general welfare, primarily to serve the purposes of its operators.  And it does:  “The higher we go into the top 0.5% the more likely it is that their wealth is in some way tied to the investment industry and borrowed money [rather] than from personally selling goods or services or labor as do most in the bottom 99.5%….  Entry into the top 0.5% and particularly the top 0.1% is usually the result of some association with the financial industry and its creations.”

John Moody (1919) is worth quoting at length on the specious character of corporate finance.  With the advance of modern manufacturing technologies and financial control over it, on Wall Street “the ‘value’ of a given property, instead of being based on its original or replacement cost, came to be measured by its capacity to earn profits.  Upon this new basis, ‘capital,’ as expressed through the issue of corporate stocks and bonds, was created by leaps and bounds.  As the industry of the community became more efficient and the unit of effort brought forth greater results, corporate securities were created in an ever increasing ratio. …  Corporate stocks and bonds [were issued] based on estimated future earnings.  Naturally, this modern practice of pre-empting or capitalizing probabilities was overdone…. Eventually, the capitalists learned that this new capital, which represented not only accumulated wealth and current earnings but the future possible earning power of the community generally, must be bolstered up and insured by some artificial process … Thus there arose among capitalists — large and small — a widespread demand for legislation and public aid to protect the integrity of the values which they had set up” (my italics).  Note also that these securities “expressing” fictitious values can serve as collateral to underwrite (create) new bank credit in turn; and that their “expression” (printing) in the first place also depends on anterior legislative enablement, “bolstering up” and “artificial” (legal) muscle.  This recognition is fundamental to the progressive response to these predatory developments.

The finance of the industrial infrastructure of this system floated as much bogus stock as the corporate superstructure.  In the 1870s “railroad networks that cost $250,000 in public money to build were owned by companies that capitalized themselves at $500,000 and then sold construction bonds on $500,000 more.”  The methods developed by the railroaders and by Rockefeller operations to control the oil market were adapted to corporate consolidation and finance in the 1890s by Wall Street to construct its system. The claim that these consolidations achieve efficiencies of scale is not supported by the facts.  What made Wall Street’s system different was its thoroughgoing financial organization, its consolidation of productive capacity and resources with the ensuing control of markets, prices and costs (labor included), and the organization of power and control over the American economy at large on an absentee basis with central headquarters in Manhattan — nationwide, systemic, all-pervasive, coordinated, dominant.  “Centralized control was the most important aspect of Morganization.”

New Amsterdam  [2.2]

New York began as New Amsterdam in 1624, a fortified trading post with a small adjacent settlement at the lower tip of Manhattan, the nominal capital of New Netherland, a Dutch colony conceived as a private business venture on the model of the Dutch East Indies Company, comprising a dozen small settlements scattered from Connecticut to Delaware.  It was an island culturally as well as geographically; upstate New York was settled from New England.  Forty-three years later it was ceded to England and renamed New York.  Like its mother city principally a center of import-export trade and mercantile credit, it drew many inhabitants besides Dutch and English, united by common economic interests and practices, customary values and behaviors.  Its original export business centered on trading guns, liquor and trinkets with Indians for furs — so successfully that by 1800 the peltries from the Hudson to Lake Michigan were exhausted.  John Jacob Astor’s trappers reached the Pacific in 1811.

By then New York City’s import-export entrepôt economy had considerably diversified — notably into the interconnected “triangle trade” in sugar, liquor distilling, and slaves.  “In 1655, the [Dutch West Indies] Company slave ship Witte Paert arrived in New Amsterdam from West Africa with 300 slaves who were sold at public auction, increasing the city’s population by 10 percent.”  The city quickly evolved into a major North American center of the trade and a new “slave market opened at the eastern end of Wall Street in 1700.”  By 1820 the South’s export and domestic trade and credit were in the hands of Manhattan’s mercantile and investor elite.  Over their strenuous protests New York State — heeding the dictates of its New England conscience — outlawed slavery and Manhattan’s slave markets were closed on July 4, 1827.  But until 1861 Wall Street banks continued writing mortgages with slaves as collateral and dealing in them as financial instruments, a service as vital to the South’s slave economy as Manhattan’s coastal and export trade in Southern cotton, wholesale wares and domestic staples.

A precipitating cause of the American Revolution was the Crown’s suppression of the publicly issued currencies of Colonial governments in favor of the bills circulated by the privately owned profit-making Bank of England.  The revolted Colonies and the Continental Congress resumed this practice of public bank finance.  Early Roosevelt ancestors were prominent New York investors and private bankers from the 1680s onward.  During the War of Independence Isaac Roosevelt (1726-1794), “a banker, businessman, and politician who operated a lucrative sugar refinery in the West Indies [triangle] trade (and was accustomed in this business to smuggling), … and unlike most NYC merchants [was] a supporter … of the American revolution,” was commissioned “to arrange for an emission [i.e. printing] of paper money to pay for supplies for [upstate] New York¹s troops.” (New York City remained loyal to the Crown; British troops evacuated after Yorktown.)  During and after the war, American paper currency was depreciated by private Philadelphia and New York banks and bought up in quantity by wealthy insiders for a fraction of face value.  Later, Congress was persuaded (not without bribery) to redeem it at full value in gold.  This profitable post-war stratagem was successfully repeated with Lincoln’s greenbacks and with Wilson’s Liberty Bonds.  In the variant scheme of 2008-2009 the paper (fraudulent mortgage bonds) was “emitted” privately and Congress was induced — not without threats (as well as contributions) — to maintain its inflated fraudulent face value in order to “save” the originating banksters.

As late as the Civil War, New York City also remained a comfortable home port for pirates, or “privateers” as they were called by Manhattan investors funding “shares” in their voyages with expectations of a dividend in booty.  Taking a toll of plunder on traffic with cutlass and cannon (rather than with legal instruments, financial paper and corporate collusion) piracy conducts on the high seas the defining practice of robber baronry:  to bar by force or fraud the flow of traffic and extract an arbitrary charge — on roads and bridges (with a gate and guard), on rivers and canals (with a chain and fort), in markets and fairs (with fences and entrances and gatekeepers), in credit (with moneylenders and usury).  Brooks Adams (1914) observes that the corporate financier, “in spite of his vulnerability [as one in a thousand] is of all citizens the most lawless.  He appears to assume that the law will always be enforced, when he has need of it, by some special personnel whose duty lies that way, while he may evade the law, when convenient, or bring it into contempt, with impunity….  If the capitalist has bought some sovereign function [by government franchise or otherwise], and wishes to abuse it for his own behoof, he regards the law which restrains him as a despotic invasion of his constitutional rights.”  When the Public Utilities Holding Company Act of 1935 threatened their price-control cartel arrangements, John Foster Dulles, senior partner of Morgan’s law firm Sullivan & Cromwell, “gathered together the holding company heads in a conference room at 48 Wall Street and fumed, ‘The men who drafted and promoted this law obviously do not know the law or the Constitution….    I can assure you that it violates basic constitutional guarantees and that the Supreme Court will strike it down.  My strong advice to you gentlemen is to do nothing.  Do not comply.  Resist the law with all your might, and soon everything will be all right.'”  Nevertheless the Court continued to uphold it until Congress repealed it in 2005.  Morgan named his steam yacht Corsair.  Wall Street still speaks of “making a killing” and of “skinning” its prey and still operates slave markets — in wage slavery and debt slavery and mental slavery.

The Golden Age  [2.3]

New Amsterdam was founded during its mother city’s Golden Age, with a sprinkle of patroon estates up the lower Hudson, as the Dutch Republic with its worldwide mercantile and financial empire was nearing its zenith.  In the 1500s the import-export traders, grain dealers, speculators and bankers of Amsterdam combined control of Baltic transport, markets and mercantile credit to corner the wheat harvests from Poland eastward.  In the process, “the peasantries of East Europe who were still free in the 15th century saw their lot altered in the 16th century, [as] huge areas moved back into the age of serfdom from the Baltic to the Black Sea,” re-enserfed by the arrival of a cash-crop export economy with mercantile credit, grain dealers, crop options, usury, absentee operators, and the Golden Age of Amsterdam.

In early 1920 the Federal Reserve (where the New York Branch, by design, held most of the funds and effective control from the start) raised interest rates sharply and precipitated a wave of bankruptcies that engulfed more than two million farms over the next few years and millions more after the bigger crash of 1929.  In a process that continued to decimate marginalized remnants into the 1990s and after, over the next generation rural America — a third of the population in 1930 — was depopulated, its farmer-based agricultural economy largely abolished and replaced by industrialized petrochemical pesticide corporate agribusiness on the grand scale for a continental grain market controlled by three corporations — with wage labor, central management and absentee ownership supplanting the farmer.  The difference between medieval and Dutch renaissance robber baronry was one of scale and complexity, and the difference between the Dutch Golden Age and the modern Morganized New Amsterdam version is scale, complexity, organization, sophistication, coordination, pervasiveness, system and centralized control — united and interknit by corporate finance and, as Brooks Adams points out, entirely enabled by legal contrivance enforced by government, and itself lawless — piratical.

Over 95% of the population of England in 1300 was agricultural peasantry living in rural villages.  Most were free, not serfs.  The ownership of the land they lived on and farmed descended from the Norman Conquest and belonged by inheritance to their manorial lord but tenure of village homes was typically hereditary in peasant families.  Tenure included access to livelihood — village acreage cultivated in rotation and specified use of other resources.  The work week averaged roughly 20 hours, varying widely with the seasons of the agricultural year.  Rent customarily consisted of a third of the harvest of manorial land and specified community labor on infrastructure maintenance (bridges, hedges, lanes, weirs, wells etc.). The aristocracy and manorial families together comprised fewer than 2% of the population.  Their fundamental source of income was rent from their land holdings (hence their eagerness to invest in million-acre tracts of farmland in western American in the 1800s).

Today Morganized American wealth is infinitely more diversified and sophisticated but extracting a toll on shelter remains a fundamental source.  Over three-quarters of American households today pay rent to landlords and rental investors (36.5%) or mortgages to investors (40.8%); under a quarter (22.7%) own their homes properly speaking (in freehold, un-mortgaged).  There are also 16 million “household units” vacant and over a million people homeless.  Many centuries’ slow accumulation of invention — tools, skills, crafts and methods — make construction of homes with more tractable modern materials far less demanding in time and labor than medieval England’s, but the price of shelter still averages a third and more of most people’s harvest (and does not insure access to livelihood).  The primary factor in this price is not the cost of materials or labor; it is speculative investment in “household units” and land — bought and sold in real estate and credit markets which are under investor control and pyramided over generations.

The first Secretary of the Treasury, New Yorker Alexander Hamilton established Federal land sales on this basis by determining that it be sold in square-mile sections (640 acres), a scale suited to investment by the wealthy and beyond the needs or means of most farmers, who were thus forced to buy subdivided parcels at speculators’ discretion and profitable prices.  This system, also, of financialized shelter, which turns a human necessity and right into a “capitalized” means of predation and a form of servitude, is entirely enabled by legal contrivances maintained and enforced by government — or, as in 2009, if the speculative bubble threatens to collapse, kept inflated by government.  Today America’s market in financialized shelter is so well organized and operated, so lucrative and its capitalized values so secure, that foreign investors flock to our shores to go shopping for rent slaves and mortgage serfs.

“Forestalling” is a term in early English Common Law for another medieval form of economic bullying.  You are guilty of it if you intercept a farmer approaching market with a wagonload of oats or a forester with a cart of firewood, buy the product and sell it at a higher price.  Forestalling amounts to a privateering form of robber baronry, taking its toll based on the compelling or coercive power of cash in a tight-money economy, and chicane.  The medieval law aims to prevent speculation.  For his fee, a lawyer might argue that it distinguishes inadequately between wholesale, retail and speculation — but then, so do the cumulative layers of speculative forestalling that were estimated to account for over a third of the price of a gallon of gas before that cartelized commodity exchange’s recent collapse.

Investors in mortgages and rental housing are forestalling.  This is most obvious in operations which “flip” houses — buying and quickly reselling properties in a rising speculative market.  Provision of shelter has no part in the deal; it is a pretext.  The legally enforceable deed of entitlement to extract a toll is the subject of the deal.  It could as easily be an entitlement to buy spring wheat at a specified price, as in the commodity market form of financialized forestalling.  What commodity dealers and brokers and speculators deal in is not wheat or hogs, or bread or ham, but paper entitlements to trade in harvests and herds unseen, raised elsewhere by others — entitlements underwritten by laws to enable and enforce, not inhibit or prevent economic bullying.  For the public, every form of forestalling serves as a method of adding to the price of purchases without adding to their value, and pocketing the toll as pure profit.



Sources referenced more than once are abbreviated in CAPITALS with the abbreviation and full bibliography given at their first appearance.


2.1:  Fabrication

On the development of New York City as a center of power:

WILLIAMS = William Appleman Williams, The Tragedy of American Diplomacy (New York, Dell, 1972, 2nd revised & enlarged edition; 1st ed. 1962).

LAFEBER = Walter LaFeber, The New Empire:  An Interpretation of American Expansion 1860-1898 (Cornell University Press, 1963).

Incorporation of U.S. Steel:

Charles & Mary Beard, A Basic History of the United States (Philadelphia, 1944), p. 307-308 quoted.

COREY = Lewis Corey, The House Of Morgan (New York, 1930; rpr. AMS 1969) p. 273-274 quoted — an excellent history of Morgan activities from pre-Civil War beginnings through the 1920s, a highly revealing transect of this key period of our economic history.

LISAGOR & LIPSIUS = Nancy Lisagor & Frank Lipsius, A Law Unto Itself:  The Untold Story of the Law Firm Sullivan & Cromwell (New York, William Morrow, 1988) p. 34-35.

Top 0.5% wealth from financial industry:


On the fictitious character of corporate finance:

MOODY p. 1-3 quoted.

1870s railroad finance:

GOODWYN = Lawrence Goodwyn, Democratic Promise:  The Populist Moment in America (New York, Oxford, 1976 — unabridged) p. 117 quoted.  Democratic Promise (not to be confused with the 1978 abridgment) is the indispensable and definitive text on the Populists, a masterpiece and permanent monument of American historiography.

Centralization of control  (“Morganization”):

COREY 285 quoted; and passim, especially p. 132-137 on the processes and effects of financial consolidation (“Morganization”), p. 267-274 on pervasive stock watering, p. 283-289 on effects of centralization, and p. 354-355 on the extent and ramifications of Morgan control.

PUJO = Report of the Pujo Committee’s “Money Trust” investigation:  House Report no. 1593, 62nd Congress, 3rd Session 1913.  COREY draws heavily on this report, as does BRANDEIS.

David M. Kotz, Bank Control of Large Corporations in the United States (Berkeley, University of California Press, 1978).  Based on his doctoral thesis — definitive, conclusive & essential to understanding the structure of financial power in America.

CIR on centralization p. 116-126; 116 cited (1915) = vol. 1 p. 80-86; 80 cited (1916).

On falacious claims of efficiency and “economies of scale”:

COREY p. 285-286

MILLS p. 124.

2.2:  New Amsterdam

Early New York history:

WOODARD = Colin Woodard, American Nations:  A History of th Eleven Rival Regional Cultures of North America (Viking, New York, 2011).

SHORTO = Russell Shorto, The Island at the Center of the World:  The Epic Story of Dutch Manhattan and the Forgotten Colony that Shaped America (New York, Doubleday, 2004).

Oscar Theodore Barck, New York City During The War For Independence (Columbia UP, 1931, rpr. Ira J. Friedman 1966).

Edward Countryman, “Consolidating Power in Revolutionary America:  The Case of New York [State] 1750-1783, Journal of Interdisciplinary History VI:4 (Spring 1976) 645-677.

On settlement of upstate New York and regional cultures:

Frederick Jackson Turner, The Frontier in American History (New York, Henry Holt, 1920; 1947; 1958).


Slavery In New York City

WOODARD p. 71-72 quoted (“In 1655 …”).

MILLER = Nathan Miller, The Roosevelt Chronicles (Garden City, Doubleday, 1979) p. 41 quoted (slave market on Wall St.).


FONER = Philip S. Foner, Business & Slavery:  The New York Merchants & the Irrepressible Conflict (Univesity of North Carolina Press, 1941).

WRIGHT = William C. Wright, The Succession Movement in the Middle Atlantic States (Rutherford, Farleigh Dickinson University Press, 1973) p. 164-205.

LEE = Brother Basil Leo Lee, F.S.C., Discontent in New York City 1861-1865 (Washington, D.C., Catholic University Press of America, 1943).

On the economic subjection of the South to New York City:

B.B. Kendrick, “The Colonial Status of the South,” Journal of Southern History vol. 8 no. 1 (Feb. 1942) 3-22.  Kendrick, then president of the Southern Historical Association, shows that the South’s status vis-a-vis New England and New York City was, from before the Revolution up until the present day, colonial, subject, exploited:  “At present finance capitalism and imperialism hold the region in so firm a grip that no escape from the colonial status appears possible short of some catastrophic collapse of the whole imperialistic system.” (p.4).

Continental Dollars and private banks

MILLER p. 58-87; p. 58 ff. quoted.

Colin Woodard, American Nations:  A History of the Eleven Rival Regional Cultures of North America (Viking, New York, 2011) p. 159 ff. on the redemption of Continental paper.

BROWN = Ellen Hodgson Brown, Web Of Debt (Baton Rouge, Third Millennium, 2008, 3rd ed. rev. & exp.) p. 7-120 includes a lucid concise history of Colonial and early American financial practice, and of banking in the United States before the Federal Reserve Act (1913).

Terry Bouton, Taming Democracy:  ‘The People,’ the Founders, and the Troubled Ending of the American Revolution (Oxford UP, 2007) passim on the social context.

On lawless capital:

Brooks Adams, The Theory Of Social Revolutions (NY, Macmillan, 1914) p. 212-213 quoted.

LISAGOR & LIPSIUS p. 115 quoted (Foster Dulles to trust company heads).

2.3:  The Golden Age

On Amsterdam and the Re-enserfment of Poland:

Fernand Braudel, Civilization and Capitalism 15th-18th Century, trans. Siân Reynolds, (New York, Harper & Row, 1982-1985) in 3 volumes; see The Wheels of Commerce (vol. 2) p. 266-272 (266-267 quoted) & The Perspective of the World (vol. 3) p. 253-261.

ANDERSON = Thornton Anderson, Brooks Adams:  Constructive Conservative (Ithaca, Cornell University Press, 1951).  Compare Adams, quoted p. 62: “In India, with the coming of the English land laws, the old Moslem gentry was supplanted by the Marwari moneylender.”

On the 1920-1922 American rural depression:

PETTIGREW p. 52-55 & 397 prints verbatim the “bankers circulars” that precipitated the credit contractions and panics of 1873 and 1893 and describes the same process occuring in 1920-22.

Robert L. Morlan, Political Prairie Fire:  The Nonpartisan League 1915-1922 (University of Minnesota Press, 1955; rpr. St. Paul, Minnesota Historical Society Press, 1985).

On recent rural depopulation in America:

Wendell Berry, The Gift of Good Land:  Further Essays Cultural and Agricultural (New York, North Point, 1982) p. 122.

Joel Dyer, Harvest Of Rage:  Why Oklahoma City Is Only the Beginning (Westview Press, Harper/Collins, Boulder 1997).  Chapters 6 & 7.  Dyer is confused and tendentious, but these chapters reliably document the persistence of this depopulation by finance.


Frederic Seebohm, The English Village Community examined in its relations to the manorial and tribal systems and to the common or open field system of husbandry (Longmans, Green, London, 1896).  This is the classic discussion of the English medieval village and its agricultural economy.

Peter Pagnamenta, Prairie Fever:  British Aristocrats in the American West 1830-1890 (New York, Norton, 2012).

Mona Chalabi, “How Many Homeowners Have Paid Off Their Mortgages,” (December 11, 2014) 2013 statistics cited from the “American Community Survey.”

Dionne Searcey & Keith Bradsher, “Chinese Cash Floods U.S. Real Estate Market,” New York Times (November 29, 2015) e.g.

On forestalling:

Alan Harding, England in the Thirteenth Century (Cambridge, 1993) p. 135 & 144.

May McKisack, The Fourteenth Century 1307-1399 (Oxford, 1959) p. 202 & n. 3.


Diogenes is an over-educated American landless peasant.  His great-grandfather, a co-operative orchardist, helped California progressives overturn Southern Pacific’s corporate political machine in 1910.  He thinks this advance needs to be re-established and greatly extended, nationally, not reversed.  He regards progressive successes in many states during this era as a recommendation for their non-partisan grassroots methods of public education and legislative action and for their targeting of the legal enablements of financial predation, and he considers it crucial to extract lessons for the present from their history of defeats and failures as well as of successes, and to understand the methods by which they were thwarted, the better to succeed in the future.

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