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It is with a large sigh that I enter this discussion. :) 
 
Three quick points: 
 
1.  The only scholarly source for the notion that the Fed was a conspiracy, 
or an intentional attempt to cartelize the banking conspiracy, that I know 
of (and surely the one that explains the Austrian connection) is Murray 
Rothbard's "The Federal Reserve as a Cartelization Device" in *Money in 
Crisis* edited by Barry N. Siegel, 1984, Pacific Institute for Public 
Policy.  Rothbard's argument is just as you put it:  the bankers wanting to 
protect themselves from competition.  Rothbard ties it in with the 
Progressive Era history by folks like Wiebe, Kolko and Weinstein.  However, 
there is no hint in the paper of any new world order stuff or anti-Semitism 
or the like. 
 
While I don't think that Rothbard's argument is totally out of the question 
(there was surely an element of rent-seeking in the ways in which the big 
New York bankers helped shaped the legislation), I think it overlooks the 
whole Progressive Era context as well as the way in which the political 
forces at the time ensured that non-central bank solutions to the problems 
of the National Banking System had little chance of success.  The Fed was 
more of a really bad third-best solution than some sort of intentional 
conspiracy to do anything.  Even conspiracy theorists couldn't come up with 
an institution that was structured so poorly. :)  I have tried to 
articulate this argument to some degree in my 1992 Westview Press book, 
chapter 5. 
 
2. Obviously, a defense of free banking as being superior to central 
banking need not commit one to a conspiracy theory view of the Fed.  I hope 
the literature that James refers to does not undermine the very scholarly 
historical and theoretical arguments that have been made in the literature 
on free banking (by Austrians and others) that has emerged in the last 15 
or 20 years. 
 
3. Equally obviously, I hope, it should be noted that the endorsement of 
some of those views by folks associated with the Mises Institute should not 
imply that all Austrians, especially those of us who do monetary history, 
share that perspective.  Austrians are a diverse group too. 
 
 
Steven Horwitz 
St. Lawrence University 
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http://www.stlawu.edu/shor 
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