“It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.”
— Henry Ford
“Give me control of a Nation’s money supply, and I care not who makes its laws.”
— M. A. Rothschild
The first MAJOR MYTH, accepted by most people in and outside of the United States, is that the Fed is owned by the Federal government, as implied by its name: the Federal Reserve Bank. In reality, however, it is a private institution whose shareholders are commercial banks; it is the “bankers’ bank.” Like other corporations, it is guided by and committed to the interests of its shareholders
In October of 1907 several banking firms, starting with the Knickerbocker Trust Company of New York, collapsed as depositors withdrew funds for fear of unwise investments and misuse of money. Lines of people waited in front of the Knickerbocker to close their accounts. Days later, the Trust Company of America had droves of depositors removing their money. Then, shortly thereafter, a run took place at the Lincoln Trust Company. Across the country apprehension that the panic would continue to spread occurred. In the fall of 1907 the United States was in a recession, it’s banking system lacked a lender of last resort mechanism, and an intricate network of directorships, loans, and collateral bonded the fate of many financial institutions together.
Several banking leaders including Jekyll Island Club members George F. Baker, president of the First National Bank, and James Stillman, president of National City Bank, met with financier J. Pierpont Morgan and began examining the assets of the troubled institutions. A decision was made to offer loans to any of the banks that were solvent. The secretary of the treasury George B. Cortelyou was eager to divert the situation and offered the New York bankers use of government funds to help prevent an economic disaster. President Theodore Roosevelt, while the panic of 1907 transpired, was on a hunting trip in Louisiana.
In the following days, acting like a one-man Federal Reserve system, J. Pierpont Morgan decided which firms would fail and which survive. Through a non stop flurry of meetings, he organized rescues of banks and trust companies, averted a shutdown of the New York Stock Exchange, and engineered a financial bailout of New York City.” In the end, the panic was blocked and several young bankers including Henry P. Davison and Benjamin Strong Jr. were recognized for their work organizing personnel and determining the liquidity of the banks involved in the crises. In 1908 J. Pierpont Morgan asked Henry P. Davison to become a partner in his firm J. P. Morgan & Co. and in 1914 Benjamin Strong Jr. was selected to be the first president of the Federal Reserve Bank of New York.
Soon after the 1907 panic, Congress formed the National Monetary Commission to review banking policies in the United States. The committee, chaired by Senator Nelson W. Aldrich of Rhode Island, toured Europe and collected data on the various banking methods being incorporated. Using this information as a base, in November of 1910 Senator Aldrich invited several bankers and economic scholars to attend a conference on Jekyll Island. While meeting under the ruse of a duck-shooting excursion, the financial experts were in reality hunting for a way to restructure America’s banking system and eliminate the possibility of future economic panics.
The 1910 “duck hunt” on Jekyll Island included Senator Nelson Aldrich, his personal secretary Arthur Shelton, former Harvard University professor of economics Dr. A. Piatt Andrew, J.P. Morgan & Co. partner Henry P. Davison, National City Bank president Frank A. Vanderlip and Kuhn, Loeb, and Co. partner Paul M. Warburg. From the start the group proceeded covertly.
The choice of the word “Federal” in the name of the bank thus seems to be a deliberate misnomer—designed to create the impression that it is a public entity. Indeed, misrepresentation of its ownership is not merely by implication or impression created by its name. More importantly, it is also officially and explicitly stated on its Website: “The Federal Reserve System fulfills its public mission as an independent entity within government.
Not long before the establishment of the Federal Reserve Bank in 1913, President William Taft (1909-1913) pledged to veto any legislation that included the formation of a private central bank.
Soon after Woodrow Wilson replaced William Taft as president, however, the Federal Reserve Bank was founded (December 23, 1913), thereby centralizing the power of U.S. banks into a privately owned entity that controlled interest rate, money supply, credit creation, inflation, and (in roundabout ways) employment. It could also lend money to the government and earn interest, or a fee—money that the government could create free of charge. This ushered in the beginning of the gradual rise of national debt, as the government relied more on borrowing from banks than self-financing, as it had done prior to granting the power of money-creation to the private banking system.
The late Congressman Louis McFadden, Chairman of the House Banking and Currency Committee in the 1930s, described the Fed in the following words:
“Some people think that the Federal Reserve Banks are United States Government institutions. They are private monopolies which prey upon the people of these United States for the benefit of themselves and their foreign customers; foreign and domestic speculators and swindlers; and rich and predatory money lenders.”
The fact that the Fed is committed, first and foremost, to the interests of its shareholders, the commercial banks, explains why its monetary policies are increasingly catered to the benefits of the banking industry and, more generally, the financial oligarchy. Extensive deregulations that led to the 2008 financial crisis, the bank bailouts in response to the crisis, the continued showering of the “too-big-to-fail” financial institutions with interest-free money, the failure to impose effective restraints on these institutions after the crisis, the cuts in social safety net programs in order to pay for the gambling losses of high finance, and other similarly austerity policies—can all be traced to the political and economic power of the financial oligarchy, exerted largely through monetary policies of the Fed.
So, in the final analysis, the money supply, government debt, credit creation, inflation and to a large degree employment is controlled by the member banks of the privately held Federal Reserve Bank. But the question remains, “Who controls the member banks?”
Interesting question, is it not?
