The Creature from Jekyll Island: A Second Look at the Federal Reserve

Physical Copy:


By: Edward Griffin

Rating: B

This book has been recommended reading by several entrepreneurial thought leaders to further understand the concept of money. “Money is made up,” they say. I didn’t understand what that meant until reading this book. This book is a crash course about the Federal Reserve System (The Fed), its controversial creation, and criticism of its practices.

My favorite criticisms were that the Federal Reserve is:

  • Privately controlled;
  • Inflationary;
  • Using the FDIC to underwrite the risky behaviors of big banks;
  • Allowing fractional banking to cause unwarranted inflation and allow government spending to exponentially grow out of control.

But first…

What is the Fed?

The Federal Reserve System is a private central banking system composed of:

  • Federal Reserve Banks: 12 regional Federal Reserve Banks covering specific geographic areas of the United States. 
  • Board of Governors: An independent agency of the federal government.
  • Federal Open Market Committee: Consists of the members of the Board of Governors and Reserve Bank presidents.

The Fed is the main monetary authority of the United States. Their main duties include conducting national monetary policy, supervising and regulating banks, maintaining financial stability, and providing banking services. Their main functions are to set interest rates, manage the money supply, and regulate financial markets.

Who created it?

This is the main subject of the book.”The Creature from Jekyll Island” takes its name from Jekyll Island, Georgia, where a secretive meeting of prominent bankers, financiers, and politicians occurred in 1910. They met to formulate a plan to address the nation’s recurring financial crises. The idea of the Federal Reserve was then born.

Key Participants Present at the Secret Meeting on Jekyll Island:

  • Nelson Aldrich: A powerful Republican senator and father-in-law to John D. Rockefeller Jr. Aldrich was a driving force behind the push for a central bank.
  • Arthur Shelton: Aldrich’s Secretary.
  • Paul Warburg: A German-born financier with extensive ties to international banking, Warburg brought his expertise and ideas for a central bank to the meeting.
  • Frank Vanderlip: A prominent banker with ties to the National City Bank of New York, Vanderlip played a key role in the development of the Federal Reserve’s structure.
  • Henry Davison: As a senior partner at J.P. Morgan & Co., Davison was another influential figure involved in the Jekyll Island gathering.
  • Abram Piatt Andrew: U.S. House of Representatives from Massachusetts.

The Federal Reserve Act of 1913

After the secret meeting on Jekyll Island, the Federal Reserve Act was drafted and eventually passed into law in 1913. The Act was designed to give the appearance of government control while actually placing significant power in the hands of private bankers. The Act established a system of regional banks, overseen by a Federal Reserve Board, which collectively formed the Federal Reserve System.

The Creature Unveiled:

Griffin characterizes the Federal Reserve as a “creature” because it exists outside the traditional government structure, yet exerts significant control over the nation’s monetary policy and financial system. He argues that the Fed’s true nature has been concealed from the American public and that it operates in the shadows, free from democratic oversight.

He emphasizes that the Federal Reserve is composed of regional banks and a Board of Governors in Washington, D.C., all of which work together to regulate the money supply, interest rates, and banking regulations. According to Griffin, these functions are carried out to benefit the interests of the banking elite rather than those of the general public.

Critiques of the Federal Reserve:

The Name is Misleading On Purpose: Great intention was given to the name so as not to alarm the public. The Federal Reserve is not “Federal” meaning it is not a government entity. It is a private entity. It is also not a “Reserve”. It does not hold any money. Rather it is an alliance of the major banks and operates like a cartel. “The Banking Cartel” is a lot more alarming to the public.

Privately Owned and Controlled: The Fed is a private institution, owned by member banks, and operates for their benefit. The government’s role is largely ceremonial while the Federal Reserve’s true decision-makers are hidden from public scrutiny.

The Hidden Agenda: The Federal Reserve was created to serve the interests of the banking elite rather than the public. The real motivations behind the Federal Reserve Act were to centralize financial power, protect the banking industry from competition, and allow for more government borrowing. 

The Fed has been a key enabler of government spending, as it facilitates the issuance of government debt through the purchase of Treasury securities. This has led to a cycle of increasing government debt, which in turn puts pressure on the Fed to keep interest rates low to service the debt. Low interest rates, Griffin argues, encourage reckless borrowing and spending by both the government and consumers.

Monetary Policy – Manipulating Interest Rates: The Fed has the ability to manipulate interest rates and, consequently, influence inflation and economic stability. This issue is that this power is often wielded to favor the financial elite (i.e. The Hidden Agenda).

Creation of the FDIC: The book criticizes the Fed for its role in creating the Federal Deposit Insurance Corporation, the FDIC. The FDIC was created by the Banking Act of 1933 as passed by the US government. In effect, the FDIC is insurance for deposited funds that bails a bank out by allowing it to borrow from the federal government (i.e. tax dollars) if any adverse event at a bank were to occur. The issue is that these bailouts disproportionately benefit large banks and their shareholders. The large banks are using their control of the Fed to influence policy that underwrites their risky business practices.

Monetary Policy – Fractional-reserve banking: The Federal Reserve has the power to create money “out of thin air” by expanding the money supply through monetary policies. One of those policies is a process known as fractional reserve banking.

In this system, banks are only required to hold a fraction of their deposits as reserves, allowing them to lend out the majority of the funds. 

For example, a reserve ratio of 10% would mean that if a bank had $1 in deposit it can lend $9.

With this practice, when loans are made, new money is effectively created, leading to an increase in the money supply. Over the years, the Fed has required lower and lower reserve ratios. This practice is responsible for devaluing the purchasing power of the U.S. dollar over time, contributing to inflation.

History of Required Reserve Ratios in the US:

  • 1910s: 13%
  • 1920s: 7-8% (Great Depression)
  • 1930s: 10-14%
  • 1940s: 10-12%
  • 1950s: 10%
  • 1960s: 10%
  • 1970: 10% (We moved away from the gold-backed dollar in 1971)
  • 1975: 6%
  • 1980s: 8-12% (Savings and Loan Crisis)
  • 1990-2019: 10%
  • 2020: 0% (COVID Response…gross)


The central argument is that the Federal Reserve is a privately-owned entity that serves the interests of a financial elite, rather than the American people. They have a dramatic impact on inflation, economic stability, and government debt, while maintaining very little transparency. This economic tool is broken. We can either do away with it or modify it. Regardless, the Federal Reserve needs to change substantially.

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