Bag the Fed!
By Jerry Mazza
Online Journal Associate Editor
Dec 8, 2008, 00:22
Despite its name, the Federal Reserve System is not owned by
the federal government. It is actually a private company of bankers with 12
branches or central banks that expand and contract our money supply as they
have doing for nearly 100 years.
And, even though the Fed is not part of the US government,
the Fed�s Board of seven governors is appointed by the president and confirmed
by the Senate for 14-year terms.
As we look at the Federal Reserve System, we should remember
banker Meyer Rothschild�s apocalyptic warning �Let me issue and control a
nation�s money and I care not who writes its laws.� Really? That�s pretty
cocky. But let�s go back to the beginning, the first
central bank in America.
Dubious thanks go to that scoundrel Alexander Hamilton who
lobbied for the first private central Bank. Despite protests from many,
including Thomas Jefferson who said, �I sincerely believe the banking
institutions having the issuing power of money are more dangerous to liberty
than standing armies,� Hamilton
got his way. In 1791, Congress chartered the First Bank of the United States
for 20 years and George Washington signed off on it. Hamilton also got to be the first Secretary
of the Treasury. Yet Jefferson�s knock was
right on the money.
When the charter expired in 1811, Madison, desperate to stabilize the currency,
revived it in 1816 as the Second
Bank of the United States. Both banks were private companies. For that and
other reasons (like there was no mention in the Constitution of national banks),
President Andrew Jackson hated the bank and wanted it gone. He commented that,
�The bold efforts the present bank had made to control the government are but
premonitions of the fate that await the American people should they be deluded
into a perpetuation of the institution or the establishment of another like it.�
Jackson had to
replace two Secretaries to the Treasury who refused to remove the government�s
funds and call on former Attorney General Roger Taney to do his bidding. This
caused the Second Bank of the United
States to lose its charter in 1836 and cease
operations in 1841.
In 1863, the National Banking Act created a system of
national banks. They managed to create a series of panics in 1873, 1893, and
1907, which led to a demand for a third central banking system. And thus, in
meetings veiled in secrecy at Georgia�s
Jekyll Island, the Federal Reserve System was
born in 1913, spurred on by GOP Senator Nelson Aldrich.
Aldrich�s other players included A. Piatt Andrew, Assistant
Secretary of the Treasury and Special Assistant of the National Monetary
Commission; Frank Vanderlip, president of the National City Bank of New York;
Henry P. Davison, senior partner of J.P. Morgan Company, and generally regarded
as Morgan�s personal emissary; and Charles D. Norton, president of the
Morgan-dominated First National Bank of New York.
Joining the group just before the secret train left New Jersey�s Hoboken
station were Benjamin Strong, also known as a lieutenant of J.P. Morgan; and
Paul Warburg, a recent immigrant from Germany who had joined the banking
house of Kuhn, Loeb. Warburg was considered the architect of the plan devised
Six years later, a financial writer named Bertie Charles
Forbes who later founded Forbes Magazine (the present editor, Malcolm Forbes,
is his son) wrote: �Picture a party of the nation�s greatest bankers stealing
out of New York on a private railroad car under cover of darkness, stealthily
hiding hundred of miles South, embarking on a mysterious launch, sneaking onto
an island deserted by all but a few servants, living there a full week under
such rigid secrecy that the names of not one of them was once mentioned lest
the servants learn the identity and disclose to the world this strangest, most
secret expedition in the history of American finance. I am not romancing; I am
giving to the world, for the first time, the real story of how the famous
Aldrich currency report, the foundation of our new currency system, was written.
. . .�
Aldrich�s daughter, Abby, later married John D. Rockefeller,
Jr. and their son Nelson Aldrich Rockefeller, brother of John D. III, Winthrop,
Laurence and David, became governor of New York and later vice president under
Gerald Ford. Eek. Bottom line, this was the cr�me de la cr�me of the financial system
creating the Federal Reserve System? The name purposely omitted the words
�Central� or �bank� or Wall Street. It is also a curiously random fact that the
dollar of 1907 is now worth about four cents.
How the Fed controls
Since its inception, Wiki tells us,
the Fed has controlled the interest rates on lending money. Then, by increasing
or decreasing the money supply, it regulates the value of money. The more of it
around, the lower its values, sort of a hidden inflation. You could say the Fed
actually produces one thing: debt. Every single buck the Fed issues is loaned
at interest, with an inherent debt amount. The Fed has a monopoly on issuing
We actually have Hamilton again to thank (not) for proposing
to establish the initial funding for the First Bank
of the United States through the sale of $10 million in stock, of which the
US government would buy the first $2 million in shares. Since the government
didn�t have the $2 million, Hamilton suggested that it make the stock purchase
using money loaned to it by the bank; a very contemporary paradigm. He proposed
that the loan be paid back in 10 annual equal installments. The remaining $8
million in stock could be bought by the public in the US and overseas, a sample
of how Hamilton�s mind worked and could to this day on Wall Street with great
But I digress. The Fed always increases the money supply to
increase the money owed to it. That money is also loaned out, as said earlier,
at interest, creating more debt, which equals a kind of economic slavery
because it�s impossible for the government to ever free itself from this
self-generating debt-load. The Fed also issues bonds at interest to the public
and banks and foreigners. When the Fed wants to create more money, it buys
bonds with a simple bookkeeping entry, thereby not paying for them.
This leads us to the Fed�s other major cancer: fractional
lending, i.e. for every actual dollar in reserve, they can lend 10 to-x-number
of dollars in fractional reserve. Thus banks can create deposits by creating
money with fractional lending, billions of free money each year, less interest
to depositors. It�s no wonder that banks create and are responsible for the
lion�s share of inflation. In fact, the Fed was faulted that during the 1920s,
it experimented with alternatively creating and destroying money. The notable
Milton Friedman, among many other scholars, said the Fed helped to create the
late 1920s inflated stock market bubble which burst in 1929, after which money
was tightened, adding greatly to the pain.
The only relatively stable period in our history, an expert
friend of mine notes, came out of the New Deal�s banking reforms, the last of
signed away. As wikipedia
reports, it was the Gramm-Leach-Bliley Financial Services Modernization
Act . . . enacted November 12, 1999, by the United States Congress. It
repealed the Glass-Steagall Act of 1933, �opening up
competition among banks, securities companies and insurance companies. The Glass-Steagall
Act prohibited a bank from offering investment, commercial banking, and
insurance services.� Now, we have one big disastrous muddle.
�The Gramm-Leach-Bliley Act (GLBA) allowed
commercial and investment banks to consolidate. For example, Citibank merged
with Travelers Group, an insurance company, and in 1998 formed the conglomerate
Citigroup, a corporation combining banking and insurance underwriting services
under brands including Smith-Barney, Shearson, Primerica and Traveler Insurance
Corporation. This combination, announced in 1993 and finalized in 1994, would
have violated the Glass-Steagall Act and the Bank Holding Company Act by combining
insurance and securities companies, if not for a temporary waiver process. The
law was passed to legalize these mergers on a permanent basis. Historically,
the combined industry has been known as the financial services industry,� which
fundamentally and first serves itself your bucks.
The Fed�s never been
audited by Congress
Yes, in the near century it has existed, the Fed has never
had the pleasure of being audited by Congress, yet it should audit and control
the Federal Reserve for it to be a legal institution conforming to the
Constitution of the United
States. Not. A 1982 Supreme Court case
determined that the Fed is an independent entity with no oversight by
government. The Reserve does issue a weekly public balance sheet, although it
has been criticized for its �culture of secrecy� in terms of obtaining other
information. Some critics have claimed that the Federal Reserve System is a
scheme to enrich a few wealthy bankers at the expense of the public. Could that
possibly be? My god, remember that 1907 dollar worth four 2008 cents.
In fact, to my knowledge the Fed hasn�t paid income tax on
trillions of dollars taken from taxpayers. Yet the Congressional record claims
government can buy the Fed back at any time for $450 million, about half the
money we pay them every day. Are you wondering why the Congress doesn�t do just
that: buy them back or better flat out nationalize them into the Treasury,
under complete surveillance, with total transparency?
One good reason is that Congress loves the Fed because it
allows them to spend all they want without restraints, except, of course, for
that mangy national debt piling up in the background that our kids will have to
eat for Christmas. In fact, the Constitution does say, �The Congress shall have
the power . . . To coin Money, regulate the value thereof,� yet nowhere does it
give Congress the authority to hand over this responsibility to a bunch of
private bankers. Yet, there are the basics for your perusal.
Also, creating what is a fiat currency causes inflation and
savers are hit the hardest by this. Some who try to beat inflation become
investors in the stock market. But look how the Federal Reserve lending
practices caused the price of stock to tank in the recent economic crisis,
nearly wiping out people�s life savings. Inflation and mismanaged policies are
felt by everyone and are reason enough to oppose the Federal Reserve. In the
words of Thomas Jefferson ��A government big enough to give you everything you
want, is strong enough to take everything you have . . .�
How to put the brakes
Besides today�s government issuing its own US Notes as the
currency, they can take it over making it replenish the reserves. This can be
done so that banks can be at 100 percent reserve banking, not fractional
reserve banking. Central banks would be needed as clearing houses and vaults
for US notes. The Federal Reserve Act would be no longer necessary and should
be repealed. If this sounds a little Ron Paulish, it is. It allows for monetary
power to be transferred back to the Treasury Department, disallowing further
creation of money by central banks.
The national debt, despite its staggering $12.3 trillion
could be reversed, and with a little help from our friends, be reversed in a
matter of several years. Getting rid of fractional lending along with the Fed
would help avoid bankruptcies, governmental and personal inflation, deflation,
and/or total financial collapse.
The Monetary Reform
This is as Paul advocates propose it and I understand how it
would work . . .
1. Pay off the debt with debt-free US notes. Amen.
2. Abolish Fractional Reserve banking. As the debt is paid
off, the reserve requirements of all banks and financial institutions would be
raised proportionately at the same time to absorb the new US notes, which
would be deposited and become the banks� increased reserves. Towards the end of
the first year of transition, remaining liability of financial institutions
would be acquired by the US
government in a one-time operation.
They too would be paid off with US money notes to keep US
money supply stable. At the end of the first years, all debt one hopes could be
paid, and we can enjoy the benefits of full reserve banking. The Fed would be
obsolete, oh guzzling dinosaur that it is.
3. Repeal the Federal Reserve Act and the National Banking
Act of 1864. The acts delegate money power to private organizations. Hand back
the powers to the Department of Treasury as they were under President Lincoln,
when he created bank notes, Greenbacks, to pay for Civil War expenses. No
banker affiliated with financial institutions should be allowed to regulate
banking. After the first two years of reform, these acts would serve no useful
4. Withdraw the US from the IMF (International
Money Fund), the World Bank and the BIS (the Bank of Internal Settlements).
They further concentrate interests and powers of private banking over the
world�s economy and the US�s.
We must withdraw from them. The harmless functions they perform like currency
exchanges can be accomplished by newer organizations limited to those
Such a Monetary Reform Act would guarantee that the amount
of money in circulation stay stable, causing neither inflation nor deflation.
In the last three decades alone, the FED has doubled the US money supply every 10
years. That fact and fractional reserve lending are the real causes of
inflation and the reduction in our buying power.
The money supply should increase slowly to keep prices
stable and in proportion to population growth, roughly around 3 percent a year,
and not at the whim of a group of bankers meeting in secret. In fact, all
future decisions about how much money must be in the US economy must be made on
statistics of population and the price-level index. The new monetary regulators
and the Treasury Departments (in the past called the Monetary Committee) would
have zero discretion in this matter except in times of declared war.
This would insure a steady stream of stable money growth, 3
percent a year, and result in stable prices and no sharp changes in money
supply. To make sure the process is completely open and honest, all
deliberations would be public not secret as meetings of the Fed Board of
Governors are today. How do we know this will work? Because these steps remove
the two causes of economic instability: the Fed-interest-bled dollar and
fractional (fictional) reserve banking -- and the newest one as well, the Bank
of Internal Settlements (BIS) mentioned above. Most important, the danger of
depression would be eliminated.
No matter how we cut it, the Fed needs to be bagged. It has
bound and gagged our financial system for too long and the damage has been
savage. There is a movement called THE FED IS DEAD, basically putting forth
these ideas which are definitely worth considering, otherwise we all drown down
the money hole while the rich and greedy sail away with everything we own. It�s
that simple. Act now. This offer will be repeated. That is, until everyone gets
Jerry Mazza is a freelance writer living in New
York City. Reach him at firstname.lastname@example.org. read his new book, �State Of Shock: Poems from 9/11 on� at www.jerrymazza.com, Amazon or Barnesandnoble.com.
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