DEBT DIAGNOSIS

A Con­cise His­tory of the Fed

Admit noth­ing. Explain nothing.

Mayer Amschel Bauer Roth­schild, founder of the Inter­na­tional Bank­ing House of Roth­schild said:

“Let me issue and con­trol a nation’s money and I care not who writes the laws.”

The Roth­schild broth­ers, already lay­ing the foun­da­tion for the Fed­eral Reserve Act, wrote the fol­low­ing to New York asso­ciates in 1863:

“The few who under­stand the sys­tem will either be so inter­ested in its prof­its or be so depen­dent upon its favours that there will be no oppo­si­tion from that class, while on the other hand, the great body of peo­ple, men­tally inca­pable of com­pre­hend­ing the tremen­dous advan­tage that cap­i­tal derives from the sys­tem, will bear its bur­dens with­out com­plaint, and per­haps with­out even sus­pect­ing that the sys­tem is inim­i­cal to their interests.”

In 1906, Sen­a­tor Nel­son Aldrich – known as the “Gen­eral Man­ager of the Nation” because of his impact on national pol­i­tics and posi­tion on the Sen­ate Finance Com­mit­tee — sold his inter­est in the Rhode Island street rail­way sys­tem to the New York, New Haven and Hart­ford Rail­road, whose pres­i­dent was J. P. Morgan’s loyal ally, Charles Sanger Mellen.

By 1906 the annual rate of US cap­i­tal for­ma­tion was run­ning at $5 bil­lion. This rapid expan­sion went hand in hand with the cre­ation of enor­mous indus­trial and finan­cial monop­o­lies. By 1904, more than 1,800 com­pa­nies had been con­sol­i­dated into 93 cor­po­ra­tions, a finan­cial con­sol­i­da­tion led by J Pier­pont Morgan.

A few his­to­ri­ans believe that J.P. Mor­gan pub­lished rumors that the Knicker­bocker Trust Com­pany (in the ten years up to 1907, trust com­pa­nies had increased three and a half times, to $1.4bn, com­pared with state banks, which had dou­bled to $1.8bn. The Knicker­bocker Trust was the third largest Trust in New York with $65mn in deposits and 18,000 depos­i­tors — Robert F Bruner and Sean D Carr, The panic of 1907) was insol­vent, the widely spread rumors were fol­lowed by the *National Bank of Com­merce announc­ing it would stop accept­ing checks for the Trust Com­pany which trig­gered a run of depos­i­tors demand­ing their funds back –  thus pre­cip­i­tat­ing the Panic of 1907.

* The National Bank of Com­merce was the prin­ci­pal cor­re­spon­dent bank for bank clear­ings in the area south­west of Chicago and St. Louis. Because of this role, Com­merce was at one point among the 20 largest banks in the United States, as mea­sured by assets. Wikipedia

The Knickerbocker’s col­lapse caused banks and trust com­pa­nies to hoard their funds. No loans were made, stocks slumped to their low­est level since Decem­ber 1900 (the stock mar­ket fell 50%) and the cri­sis spread to the Trust Com­pany of America.

In the Wednes­day, Octo­ber 23, edi­tion of the New York Times was a head­line describ­ing the Trust Com­pany of Amer­ica, the sec­ond largest trust com­pany in New York City, as the cur­rent “sore point” in the panic. JP Mor­gan sum­moned the Sec­re­tary of the US Trea­sury, George B Corte­lyou, to New York. On being assured that the Trust Com­pany of Amer­ica was sol­vent with Fed­eral back­ing, JP Mor­gan gath­ered together the pres­i­dents of all the key banks and orga­nized an imme­di­ate $3 mil­lion loan to Trust Company.

J Pier­pont Mor­gan had made his rep­u­ta­tion and that of his bank. At this time Mor­gan started to slowly dis­en­gage from the day to day activ­i­ties of his firm pre­fer­ring to con­cen­trate on his pas­sion for tour­ing Europe, col­lect­ing art and lit­er­a­ture and sit­ting on the boards of char­i­ta­ble organizations.

“All this trou­ble could be averted if we appointed a com­mit­tee of six or seven public-spirited men like J.P. Mor­gan to han­dle the affairs of our coun­try.” Woodrow Wil­son talk­ing about The Trou­bles of 1907

The Panic of 1907 led to the pas­sage of the Aldrich – Vree­land Act in 1908, this act estab­lished the National Mon­e­tary Com­mis­sion — spon­sored and headed by Sen­a­tor Aldrich.

Aldrich also co-authored the Payne-Aldrich Tar­iff Act of 1909 which removed restric­tive import duties on fine art. This enabled Amer­i­cans to bring in very expen­sive Euro­pean art­works that became the foun­da­tion of many lead­ing museums.

On the night of Novem­ber 22, 1910 a del­e­ga­tion of the nation’s lead­ing financiers, led by Sen­a­tor Nel­son Aldrich, left New Jer­sey for a very secret ten day meet­ing on Jekyll Island, Georgia.

Aldrich had pre­vi­ously led the mem­bers of the National Mon­e­tary Com­mis­sion on a two year bank­ing tour of Europe. He had yet to write a report regard­ing the trip, nor had he yet offered any plans for bank­ing reforms.

“Despite my views about the value to soci­ety of greater pub­lic­ity for the affairs of cor­po­ra­tions, there was an occa­sion near the close of 1910, when I was as secre­tive, indeed, as furtive, as any con­spir­a­tor.… Since it would have been fatal to Sen­a­tor Aldrich’s plan to have it known that he was call­ing on any­body from Wall Street to help him in prepar­ing his bill, pre­cau­tions were taken that would have delighted the heart of James Still­man.” Frank Van­der­lip, the Sat­ur­day Evening Post, Feb­ru­ary 9, 1935

Accom­pa­ny­ing Sen­a­tor Aldrich to Jekyll Island were:

• Frank Van­der­lip, pres­i­dent of the National City Bank of New York, asso­ci­ated with the Rockefellers
• Henry P. Davi­son, senior part­ner of J.P. Mor­gan Com­pany, regarded as Morgan’s per­sonal emissary
• Charles D. Nor­ton, pres­i­dent of the Mor­gan dom­i­nated First National Bank of New York
• Col. Edward House, who would later become Pres­i­dent Woodrow Wilson’s clos­est adviser and founder of the Coun­cil on For­eign Relations
• Ben­jamin Strong, a lieu­tenant of J.P. Morgan
• Paul War­burg, a recent immi­grant from Ger­many who had joined the bank­ing house of Kuhn, Loeb and Com­pany, New York directed the pro­ceed­ings and wrote the pri­mary fea­tures of what would be called the Aldrich Plan. War­burg would later write that “The mat­ter of a uni­form dis­count rate (inter­est rate) was dis­cussed and set­tled at Jekyll Island”

After the Jekyll Island visit the National Mon­e­tary Com­mis­sion “wrote” the Aldrich Plan which formed the basis for the Fed­eral Reserve system.

“In 1912 the National Mon­e­tary Asso­ci­a­tion, under the chair­man­ship of the late Sen­a­tor Nel­son W. Aldrich, made a report and pre­sented a vicious bill called the National Reserve Asso­ci­a­tion bill. This bill is usu­ally spo­ken of as the Aldrich bill. Sen­a­tor Aldrich did not write the Aldrich bill. He was the tool, if not the accom­plice, of the Euro­pean bankers who for nearly twenty years had been schem­ing to set up a cen­tral bank in this Coun­try and who in 1912 has spent and were con­tin­u­ing to spend vast sums of money to accom­plish their pur­pose.“Con­gress­man Louis T. McFad­den on the Fed­eral Reserve Cor­po­ra­tion: Remarks in Con­gress, 1934

After sev­eral failed attempts to push the Fed­eral Reserve Act through Con­gress, a group of bankers funded and staffed Woodrow Wilson’s cam­paign for Pres­i­dent. He had com­mit­ted to sign a slightly dif­fer­ent ver­sion of the Fed­eral Reserve Act than Aldrich’s Plan.

In 1913, Sen­a­tor Aldrich pushed the Fed­eral Reserve Act through Con­gress just before Christ­mas when much of Con­gress was on vaca­tion. When elected pres­i­dent Woodrow Wil­son passed the FED.

“Our secret expe­di­tion to Jekyll Island was the occa­sion of the actual con­cep­tion of what even­tu­ally became the Fed­eral Reserve Sys­tem. The essen­tial points of the Aldrich Plan were all con­tained in the Fed­eral Reserve Act as it was passed.” Frank Van­der­lip, auto­bi­og­ra­phy, From Farm­boy to Financier

“I have unwit­tingly ruined my coun­try.” Woodrow Wil­son later said refer­ring to the FED

“We have, in this coun­try, one of the most cor­rupt insti­tu­tions the world has ever known. I refer to the Fed­eral Reserve Board. This evil insti­tu­tion has impov­er­ished the peo­ple of the United States and has prac­ti­cally bank­rupted our gov­ern­ment. It has done this through the cor­rupt prac­tices of the mon­eyed vul­tures who con­trol it.” Con­gress­man Louis T. McFad­den in 1932

The Fed­eral Reserve Bank (FED) is a pri­vately owned com­pany that con­trols, and prof­its immensely by print­ing money through the US Trea­sury and reg­u­lat­ing its value.

“Some [most] peo­ple think the Fed­eral Reserve Banks are U.S. gov­ern­ment insti­tu­tions. They are not … they are pri­vate credit monop­o­lies which prey upon the peo­ple of the U.S. for the ben­e­fit of them­selves and their for­eign and domes­tic swindlers, and rich and preda­tory money lenders. The sack of the United States by the Fed is the great­est crime in his­tory. Every effort has been made by the Fed to con­ceal its pow­ers, but the truth is the Fed has usurped the gov­ern­ment. It con­trols every­thing here and it con­trols all our for­eign rela­tions. It makes and breaks gov­ern­ments at will.” Con­gres­sional Record 12595 – 12603 —  Louis T. McFad­den, Chair­man of the Com­mit­tee on Bank­ing and Cur­rency (12 years) June 10, 1932

“… we con­clude that the [Fed­eral] Reserve Banks are not fed­eral … but are inde­pen­dent, pri­vately owned and locally con­trolled cor­po­ra­tions … with­out day-to-day direc­tion from the fed­eral gov­ern­ment.” 9th Cir­cuit Court in Lewis vs. United States, 680 F. 2d 1239 June 24, 1982

The FED began with approx­i­mately 300 peo­ple, or banks, that became own­ers (stock­hold­ers pur­chased stock at $100 per share) of the Fed­eral Reserve Bank­ing Sys­tem. The Fed is pri­vately owned — 100% of its share­hold­ers are pri­vate banks, the stock is not pub­licly traded and none of its stock is owned by the US government.

The FED bank­ing sys­tem col­lects bil­lions of dol­lars in inter­est annu­ally and dis­trib­utes the prof­its to its shareholders.

The US Con­gress gave the FED the right to print money at no inter­est to the FED. The FED cre­ates money from noth­ing, loans it out through banks and charges inter­est. The FED also buys gov­ern­ment debt with money from noth­ing, and charges U.S. tax­pay­ers interest.

The inter­est on bonds acquired with its newly-issued Fed­eral Reserve Notes pays the Fed’s oper­at­ing expenses plus a guar­an­teed 6% return to its banker shareholders.

Reuters reported on Octo­ber 3 2008:

“The U.S. Fed­eral Reserve gained a key tac­ti­cal tool from the $700 bil­lion finan­cial res­cue pack­age signed into law on Fri­day that will help it chan­nel funds into parched credit mar­kets. Tucked into the 451-page bill is a pro­vi­sion that lets the Fed pay inter­est on the reserves banks are required to hold at the cen­tral bank.”

So in addi­tion to the FED’s banker share­hold­ers receiv­ing a guar­an­teed 6%, banks also now get inter­est from the tax­pay­ers on their 10 per­cent “reserves.”

The reserve require­ment set by the Fed­eral Reserve is 10 per­cent – ie the ABC Frac­tional Bank has a bil­lion dol­lars stashed at the FED, that’s its reserve and its paid inter­est on it. That bil­lion dol­lars can be fanned into ten times that sum in loans — $1,000,000,000 in reserves becomes $10,000,000,000 in loans.

The absolute amount of bank loans and leases out­stand­ing was $6.80 tril­lion Sep­tem­ber 14, 2011. Ten per­cent of that is $680 bil­lion. US tax­pay­ers will be pay­ing inter­est to the banks on at least $680 bil­lion worth of reserves – so banks can accu­mu­late inter­est from bor­row­ers on ten times that sum in loans.

The FED is the only for profit cor­po­ra­tion in Amer­ica that is exempt from both fed­eral and state taxes.

The FED’s books are not open to the pub­lic, nor Con­gress apparently:

A first ever GAO (Gov­ern­ment Account­abil­ity Office) semi-audit of the US Fed­eral Reserve was recently car­ried out and a report was issued in July of 2011. What the audit revealed was incred­i­ble: between Decem­ber 2007 and June 2010, the Fed­eral Reserve had secretly bailed out many of the world’s banks, cor­po­ra­tions, and gov­ern­ments by giv­ing them…

US$16,000,000,000,000.00 – that’s 16 TRILLION dol­lars.

The GDP of the United States is $14.12 tril­lion, the entire national debt of the United States gov­ern­ment span­ning its 200 plus year his­tory is $14.5 trillion.

The GAO report also deter­mined that the Fed lacks a com­pre­hen­sive sys­tem to deal with con­flicts of interest:

• The CEO of JP Mor­gan Chase served on the New York Fed’s board of direc­tors at the same time that his bank received more than $390 bil­lion in finan­cial assis­tance from the Fed
• JP Mor­gan Chase served as one of the clear­ing banks for the Fed’s emer­gency lend­ing programs
• On Sept. 19, 2008, William Dud­ley — now the New York Fed pres­i­dent — was granted a con­flict of inter­est waiver to let him keep invest­ments in AIG and Gen­eral Elec­tric at the same time AIG and GE were given bailout funds.
• The Fed out­sourced the oper­a­tions of their emer­gency lend­ing pro­grams to pri­vate con­trac­tors ie JP Mor­gan Chase, Mor­gan Stan­ley, and Wells Fargo. These firms received tril­lions of dol­lars in Fed loans at near zero inter­est rates
• Two-thirds of the con­tracts that the Fed awarded to man­age its emer­gency lend­ing pro­grams were no-bid contracts

The IRS was restarted within months of the FED’s incep­tion. The roots of the IRS go back to the Civil War when Pres­i­dent Lin­coln and Con­gress, in 1862, cre­ated the posi­tion of com­mis­sioner of Inter­nal Rev­enue (The posi­tion of Com­mis­sioner exists today as the head of the Inter­nal Rev­enue Ser­vice) and enacted an income tax (the ini­tial rate was 3% on income over $800, which exempted most wage-earners) to help pay war expenses. In 1872, seven years after the war, law­mak­ers allowed the tem­po­rary Civil War income tax to expire.

Con­gress enacted a flat rate Fed­eral income tax in 1894, but the Supreme Court ruled it uncon­sti­tu­tional the fol­low­ing year because it was a direct tax not appor­tioned accord­ing to the pop­u­la­tion of each state.

Sen­a­tor Aldrich was instru­men­tal in the re-structuring of the Amer­i­can finan­cial sys­tem through a fed­eral income tax amend­ment, the 16th — he had orig­i­nally opposed an income tax as com­mu­nis­tic a decade before. The 16th Amend­ment gave Con­gress the author­ity to tax the income of indi­vid­u­als with­out regard to the pop­u­la­tion of each State:

“The Con­gress shall have power to lay and col­lect taxes on incomes, from what­ever source derived, with­out appor­tion­ment among the sev­eral States, and with­out regard to any cen­sus or enumeration.”

Con­clu­sion

In 1906 David Gra­ham Phillips wrote a series of arti­cles pub­lished in Cos­mopoli­tan claim­ing that politi­cians were receiv­ing huge pay­ments from large cor­po­ra­tions to argue their case in the Sen­ate. Phillips claimed that the main fig­ures in this scan­dal was Aldrich and Arthur P. Gor­man of Maryland.

David Gra­ham Phillips was mur­dered on 23rd Jan­u­ary, 1911. Two months later Aldrich resigned from Congress.

Sir Josiah Stamp, pres­i­dent of the Roth­schild Bank of Eng­land and the sec­ond rich­est man in Britain in the 1920s, said the fol­low­ing in 1927 at the Uni­ver­sity of Texas:

“The mod­ern bank­ing sys­tem man­u­fac­tures money out of noth­ing. The process is per­haps the most astound­ing piece of sleight of hand that was ever invented. Bank­ing was con­ceived in inequity and born in sin. Bankers own the Earth. Take it away from them but leave them the power to cre­ate money, and with a flick of a pen, they will cre­ate enough money to buy it back again. Take this great power away from them and all great for­tunes like mine will dis­ap­pear, for then this would be a bet­ter and hap­pier world to live in. But if you want to con­tinue to be the slaves of bankers and pay the cost of your own slav­ery, then let bankers con­tinue to cre­ate money and con­trol credit.”

The Fed­eral Reserve was con­ceived and given birth by an unholy alliance of Amer­i­can and British bankers. The FED buys U.S. debt with money printed from noth­ing, then charges U.S. tax­pay­ers inter­est. The US gov­ern­ment pushed through the fed­eral income tax amend­ment, restarted an income tax on Amer­i­cans to pay the inter­est to the FED and reor­ga­nized the IRS to col­lect the monies – the inter­est — “owed” to the FED from its citizens.

Since the Fed’s cre­ation in 1913 the dol­lar has lost more than 96% of its value.

Undoubt­edly the great­est achieve­ment of the FED has been to trans­form Amer­ica from being the world’s fore­most cred­i­tor nation to the world’s largest debtor nation.

Aldrich’s motto, when ques­tioned about his activ­i­ties and the rea­son­ing behind them, was to “Admit noth­ing. Explain nothing.”

“Let me issue and con­trol a nation’s money and I care not who writes the laws.” should be on every think­ing person’s radar screen. Is it on yours?

If not, maybe it should be.

Richard (Rick) Mills

rick@aheadoftheherd.com

www.aheadoftheherd.com

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