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  Abolish the Fed and Return Money Creation Power to Congress
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ECONOMIC ANALYSIS:

Abolish the Fed and Return Money Creation Power to Congress

by Stephen Lendman
Wednesday, 2 December 2009

The Fed was established to stabilize the economy, smooth out the business cycle, manage a healthy, sustainable growth rate, and maintain stable prices. But in fact, it has caused 19 recessions and substantial equity market declines each time ranging from 18.8% in 1998 to 89% from October 1929 to July 1932.

In her extraordinary book, "Web of Debt," financial writer Ellen Brown tells "the shocking truth about our money system, (how it) trapped us in debt, and how we can break free." She quotes banker/developer Reed Simpson saying:

"Credible evidence (reveals) a world (banking) power elite intent on gaining absolute control over the planet and its natural resources, including its subservient human (ones)." It's the Bilderberg Group classless society idea of rulers, serfs, and no middle class by controlling the world's money. What Baron MA Rothschild (1818 - 1874) meant by saying:

"Give me control over a nation's currency and I care not who makes its laws." Today it applies globally.

Money is bankers' "lifeblood,....fear (their) weapon." Ill-used, they'll "enslave nations and ensure perpetual wars and bondage." Brown explained all and proposed a solution.

Congressman Ron Paul has led a congressional campaign to abolish the Federal Reserve by introducing legislation in the 106th, 107th, 108th, and 110th Congresses. Each time it died in committee, but he's not deterred. He believes it's essential to:

  • end a private banking cartel's illegal monopoly over the nation's money supply and price;
  • return that power to Congress as the Constitution's Article I, Section 8 mandates;
  • end a fiat currency system that's dysfunctional, broken and corrupted;
  • return the country to a sound, hard currency monetary system; and/or
  • replace private banking with a public alternative at the federal, state, county, and municipal levels to end Fed dominance, and return the nation to sustainable, productive, stable, non-inflationary growth, free from predatory banker control.

On February 3, Paul again tried (with no co-sponsors) by introducing HR 833: Federal Reserve Board Abolition Act:

"To abolish the Board of Governors of the Federal Reserve System and the Federal reserve banks, to repeal the Federal Reserve Act, and for other purposes."

It was referred to the House Financial Services Committee where no action so far has been taken.

House and Senate measures, however, are underway to audit the Fed. On February 26, Paul introduced HR 1207: Federal Reserve Transparency Act of 2009:

"To amend title 31, United States Code, to reform the manner in which the Board of Governors of the Federal Reserve System is audited by the Comptroller General of the United States and the manner in which such audits are reported, and for other purposes."

It was referred to the House Financial Services Committee where action is now pending. As of November 20, the bill has 313 co-sponsors, a solid majority.

On November 20, the House Financial Services Committee passed the Paul-Grayson "Audit the Fed" amendment 43 - 26. It's an important step forward calling for a comprehensive Fed audit and replaces an earlier introduced weaker one. The amendment also softens HR 3996: Financial Stability Improvement Act of 2009, introduced by Rep. Barney Frank on November 3, now in four House committees, to more greatly empower the Fed, masquerading as protection from further bailouts. The House is expected to vote on HR 1207 in December.

On March 16, Senator Bernie Sanders introduced S 604: Federal Reserve Sunshine Act of 2009:

"A bill to amend title 31, United States code, to reform the manner in which the Board of Governors of the Federal Reserve System is audited by the Comptroller General of the United States and the manner in which such audits are reported, and for other purposes."

It was referred to the Senate Banking, Housing, and Urban Affairs Committee and currently has 30 co-sponsors. A super (three-fifths) majority is needed for passage to thwart a Republican filibuster to stop it.

Origin of the Federal Reserve

In 1910, the following men met secretly on the privately-owned Jekyll Island off the Georgia coast for nine days to change America's financial structure forever. They included:

  • Republican Senator Nelson Aldrich;
  • A. Piat Andrew, Assistant Treasury Secretary;
  • Benjamin Strong, head of JP Morgan's Bankers Trust and later de facto Fed chairman as governor of the New York Federal Reserve Bank, the mother bank;
  • Henry Davison, Sr., JP Morgan partner;
  • Paul Warburg, Kuhn, Loeb & Co. partner, representative for the Rothshilds and Warburgs in Europe, and the main Fed architect;
  • Frank Vanderlip, William Rockefeller representative and president of National City Bank of New York; and
  • Charles Norton, president of 1st National Bank of New York.

On December 23, 1913, they prevailed when Congress passed the Federal Reserve Act to let private bankers control the nation's money and effectively annul the Constitution's Article I, Section 8, mandating only to Congress the power to coin (create) money and regulate the value thereof. Nothing ever since has been the same. Thereafter, "we the people" meant Wall Street, not the "general welfare" or "the blessings of liberty" as the Constitution's Preamble affirms.

Congress established the Fed in the middle of the night by shepherding the legislation through a carefully arranged Congressional Conference Committee meeting between 1:30 - 4:30AM on December 22. It was then enacted the next day when many members were away for the holidays, most others hadn't read it, and it didn't matter for those who did because the text was intentionally vague. The nation's money would be printed by the US Bureau of Engraving and Printing, then issued as a government obligation, or debt, to the private Federal Reserve with interest.

Woodrow Wilson was Morgan's man in the White House with an administration full of his cronies. The Federal Reserve Act was a major coup, giving them what they long wanted and finally got, control over the nation's money and unlimited power with it. According to Brown:

Private bankers got "the exclusive right to 'monetize' the government's debt (that is, print their own money and exchange it for government securities or IOUs)." The obscure language hid the scheme's real aim "to create money out of nothing, lend it to the government at interest, and control the national money supply, expanding or contracting it at will."

Wilson signed the act, then later said:

"I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activites are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated governments in the civilized world. No longer a government of free opinion, no longer a government by conviction and the vote of the majority, but a government by the opinion and duress of a small group of dominant men" running everything today more than Wilson ever could have imagined.

Ron Paul: "The Federal Reserve Isn't Federal and Has No Reserves" - It's Privately Owned by a Powerful Banking Cartel that Runs America

Dominant member banks own it in each of the 12 Federal Reserve districts. The amount of stock each holds is proportional to its size. As mother bank, the New York Fed is most dominant, owning 53% of all shares because the nation's largest commercial banks are on Wall Street, including JP Morgan Chase, Goldman Sachs, Citigroup, and Morgan Stanley. Bank of America was founded in California, remains heavily concentrated in Western and Southwestern states, yet operates globally like the other giants. The same is true for Wells Fargo.

The largest banks are financial superpowers with interests in commercial and investment banking, insurance, real estate, home mortgages, credit cards, and virtually everything related to finance, insurance and real estate globally (the so-called FIRE sector).

The Fed is composed of a Board of Governors in Washington (its headquarters) and the 12 regional Districts/Banks in New York, Boston, Philadelphia, Richmond, Atlanta, Cleveland, Chicago, St. Louis, Minneapolis, Kansas City, Dallas, and San Francisco.

Several times previously, the Fed's legitimacy was challenged in federal court to no avail. Each time, the then current system was upheld under which each Federal Reserve Bank was ruled a separate corporation owned by commercial banks in its region. In one case, Lewis v. United States (1982), the Ninth US Circuit Court of Appeals held that "federal reserve banks are not federal instrumentalities....but are independent, privately owned and locally controlled corporations (statutorily) empowered to conduct (their affairs) without day to day direction from the federal government." In other words, they're independent of government, can do as they please, and take full advantage as the Federal Reserve Act allows, yet Congress does nothing to deter them.

Madison, Jefferson, Jackson, Lincoln and Kennedy Disagreed

In 1691, three years before the Bank of England's founding, Massachusetts became the first colony to issue its own money backed by the full faith and credit of the government. Other colonies followed, called "scrip." It freed them from British banks to run their affairs inflation free with no taxes. For over 25 years, they needed none, yet achieved sustained, stable, prosperous growth, the kind impossible under a privately run system. More on that below.

In 1751, colony-based British merchants and financiers got King George II to ban new paper money and force colonial governments to borrow it from UK bankers. In 1764, Benjamin Franklin petitioned to stop it without success. Instead, the Bank of England got Parliament to pass a Currency Act making it illegal for the colonies to issue their own money. It turned prosperity into poverty, the root cause, Franklin believed, for the Revolutionary War.

America's Founders and later presidents railed against bankers. James Madison, called them "Money Changers" saying:

"History records that the Money Changers have used every form of abuse, intrigue, deceit and violent means possible to maintain their control over governments by controlling money and its issuance."

Thomas Jefferson said:

"I sincerely believe that banking institutions are more dangerous to our liberties than standing armies. Already they have raised up a money aristocracy that has set the government at defiance. The issuing power should be taken from the banks and restored to the people to whom it properly belongs."

Jefferson opposed the first Bank of the United States, Andrew Jackson the second, and both for similar reasons:

  • distrust of profiteers controlling the nation's money; and
  • concern about the nation's banking system falling into foreign hands.

At Jefferson's urging, Congress refused renewal of the first 1811 Bank of the United States charter and discovered on liquidation that two-thirds of its owners were foreigners, mostly British and Dutch, none more influential than the Rothschilds. Later, Madison signed a 20-year charter, but after congressional renewal, Jackson vetoed what he called "a hydra-headed monster" entrapping the nation in debt.

Lincoln feared:

"The money powers prey(ing) upon the nation in times of peace and conspir(ing) against it in times of adversity. It is more despotic than a monarch, more insolent than autocracy, and more selfish than a bureaucracy. It denounces, as public enemies, all who question its methods or throw light upon its crimes. I have two great enemies, the Southern Army in front of me and the bankers in the rear. Of the two, the one at the rear is my greatest foe."

In "Web of Debt," Brown explained that they wanted 24 - 36% interest to fund the North's war on the South. As a result, Lincoln got Congress to pass the 1862 Legal Tender Act empowering the Treasury to issue "Greenbacks," interest free to finance the war and grow the economy prosperously.

In spite of assassination threats before inauguration as well as "treason, insurrection, and national bankruptcy" (during his first year in office), he:

  • built the world's largest standing army;
  • defeated the South;
  • turned the country into the world's "greatest industrial giant;"
  • launched the steel industry, a continental railroad system, and a new era of farm machinery and cheap tools;
  • established free higher education;
  • gave settler ownership rights and encouraged land development through the Homestead Act;
  • had government support all branches of science;
  • standardized mass production methods;
  • increased labor productivity by 50 - 75%; and
  • more still "with a Treasury that was completely broke and a Congress that hadn't been paid."

How? By nationalizing banking so government could print its own money, interest free, without paying usury to bankers. As a result, "the economy was jump-started with a 600 percent increase in government spending and cheap credit directed" toward productive growth, the kind impossible under a predatory bank-run financialized system for their own self-interest.

After the war, Lincoln was assassinated, of course. The Legal Tender Act was rescinded. A new national banking act was passed, and money became interest-bearing again in private hands.

Nonetheless, John Kennedy confronted Wall Street by issuing Executive Order (EO) 11110 on June 4, 1963 to:

  • amend EO 10289 (dated September 17, 1951) designating and empowering the Treasury Secretary to perform certain "functions of the President without the approval, ratification, or other action of the President;"
  • perhaps bypass the Fed and empower the president to issue currency; it constitutionally empowered the federal government to create and "issue silver certificates against any silver bullion, silver, or standard silver dollars in the Treasury;"
  • though not verified, some believe he then ordered the Treasury Secretary to issue nearly $4.3 billion worth of United States Notes, perhaps to replace Federal Reserve Notes; whether or not he planned to end the Federal Reserve System is speculation, but perhaps fearing it, among other reasons, led to his assassination five months later;
  • in 1964, Lyndon Johnson said: "Silver has become too valuable to be used as money;"
  • in late 1963, US Notes were withdrawn from circulation; and
  • noted Fed critic and author of "The Creature from Jekyll Island," G. Edward Griffin, wrote on page 569 of his book:
     
    "There was a third point, however, which everyone seemed to overlook. The Executive Order 11110 did not instruct the Treasury to issue Silver Certificates. It merely authorized it to do so if the occasion should arise. The occasion never arose. The last issuance of Silver Certificates was in 1957....six years before the Kennedy (EO). In 1987 (it) was rescinded by (EO) 12608 signed by Ronald Reagan."

Without mentioning EO 11110, it did it by amending EO 10289, rescinding the Treasury's right to issue silver-backed notes.

Publicly-run Banks Work

Their history is impressive:

  • in colonial America;
  • under Lincoln;
  • in early 20th century Australia when its Commonwealth Bank created money, made loans, and charged a fraction of privately-charged interest; until they took over, the country had one of the highest living standards in the world;
  • in the Middle Ages under a banker-free tally system;
  • in China for thousands of years before private banking, and today because Beijing directs the semi-independent People's Bank of China to grow the economy and create millions of jobs; and
  • in North Dakota, the only US state with its own bank that sustains its uniqueness and strength; it's one of two states, with Montana, running budget surpluses and the only one creating jobs because, as Brown explains:
    "it('s) ha(d) its own credit machine (since) The Bank of North Dakota (BND) was established by the state legislature in 1919, specifically to free farmers and small businessmen from the clutches of out-of-state bankers and railroad men;" ever since, BND was tasked with delivering "sound financial services that promote agriculture, commerce and industry," something no other state can match because they don't have state-owned banks.

Again Brown: It works because bankers can "create 'credit' with accounting entries on their books" through fractional reserve banking that multiplies each deposited dollar magically into about 10 in the form of loans or computer-generated funds. It lets banks re-lend many times over, and the more deposits, the greater amount of lending for sustained, productive growth. If all states owned public banks, they'd be as prosperous as North Dakota, and so would America. Instead, private bankers hold the nation hostage.

Ostensibly, the Fed was established to stabilize the economy, smooth out the business cycle, manage a healthy, sustainable growth rate, and maintain stable prices. In fact, it caused 19 recessions (including the Great Depression and current crisis nowhere near resolved and likely to intensify) and substantial equity market declines each time ranging from 18.8% in 1998 to 89% from October 1929 to July 1932.

In addition, the Fed is directly responsible for inflation and the decline in the US standard of living since 1913, and, besides the Great Depression, especially since the 1970s. From the late 18th century to 1913, virtually no inflation existed under the gold standard, except during times of war. Using government data, it now takes over $2,000 to equal $100 of pre-Fed purchasing power. In other words, a 1913 dollar is worth about a nickel, and given recent dollar weakness, even less.

Operating as a hidden government, Fed-created inflation dilutes purchasing power. It practices usury through interest rate manipulation, forcing borrowers to pay their rates. The income tax was established to pay interest on the national debt that wouldn't exist under a public banking system creating Treasury, not Federal Reserve notes.

The Constitution has no federal tax provision because the Founders believed private income was "the ultimate source of productivity." It wasn't coincidental that the February 13, 1913 16th Amendment (establishing an income tax) was ratified ahead of the year-end establishment of the Fed. It's run the country ever since, and when in trouble, gets the public to bail it out with more tax dollars, enough since 2008 to put a lien on future generations, perhaps in perpetuity unless public pressure forces change that won't come from the top down as long as bankers are in charge.

Congress empowered them to commit grand theft by transferring public wealth to themselves, a process especially virulent since the 1980s under Reaganomics-instituted "trickle-down" designed to trickle up. Ever since:

  • tax cuts for the rich replaced a progressive system;
  • the rich became super-rich;
  • consumer debt soared;
  • record high budget and national debt levels prevail;
  • real wages haven't kept up with inflation;
  • low-paying service jobs replaced higher-paying production ones offshored to low-wage countries;
  • technology-driven productivity pressures employees to work harder for less; and
  • Privatized money control imperils democracy. If the public doesn't regain control, economic tyranny will prevail.
  • during grim times like today, economic instability, lost jobs, home foreclosures, depleted savings, and personal bankruptcies have created growing poverty, hunger, homelessness, and despair with few measures taken to address them under a system favoring wealth by transferring it from the many to the few.

Privatized money control imperils democracy. If the public doesn't regain control, economic tyranny will prevail.


Steve Lendman

Stephen Lendman is a Research Associate of the Centre for Research on Globalization. He lives in Chicago and can be reached at lendmanstephen@sbcglobal.net.

Also visit his blog site at sjlendman.blogspot.com and listen to The Global Research News Hour on RepublicBroadcasting.org Mondays from 11AM to 1PM US Central time for cutting-edge discussions with distinguished guests on world and national topics. All programs are archived for easy listening.

Mr. Lendman's stories are republished in the Baltimore Chronicle with permission of the author.



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This story was published on December 2, 2009.
 



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