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What is the Federal Reserve Bank (FED) and why do we have it?

Original post made by mark, another community, on Sep 30, 2009



I believe that it is essential that all Americans know the facts regarding the FED. This article does a very good job presenting this info.



What is the Federal Reserve Bank (FED) and why do we have it?
Greg Hobbs

What is the Federal Reserve Bank (FED) and why do we have it?

The FED is a central bank. Central banks are supposed to implement a country's fiscal policies. They monitor commercial banks to ensure that they maintain sufficient assets, like cash, so as to remain solvent and stable. Central banks also do business, such as currency exchanges and gold transactions, with other central banks. In theory, a central bank should be good for a country, and they might be if it wasn't for the fact that they are not owned or controlled by the government of the country they are serving. Private central banks, including our FED, operate not in the interest of the public good but for profit.

There have been three central banks in our nation's history. The first two, while deceptive and fraudulent, pale in comparison to the scope and size of the fraud being perpetrated by our current FED. What they all have in common is an insidious practice known as "fractional banking."

Fractional banking or fractional lending is the ability to create money from nothing, lend it to the government or someone else and charge interest to boot. The practice evolved before banks existed. Goldsmiths rented out space in their vaults to individuals and merchants for storage of their gold or silver. The goldsmiths gave these "depositors" a certificate that showed the amount of gold stored. These certificates were then used to conduct business.

In time the goldsmiths noticed that the gold in their vaults was rarely withdrawn. Small amounts would move in and out but the large majority never moved. Sensing a profit opportunity, the goldsmiths issued double receipts for the gold, in effect creating money (certificates) from nothing and then lending those certificates (creating debt) to depositors and charging them interest as well.

Since the certificates represented more gold than actually existed, the certificates were "fractionally" backed by gold. Eventually some of these vault operations were transformed into banks and the practice of fractional banking continued.

Keep that fractional banking concept in mind as we examine our first central bank, the First Bank of the United States (BUS). It was created, after bitter dissent in the Congress, in 1791 and chartered for 20 years. A scam not unlike the current FED, the BUS used its control of the currency to defraud the public and establish a legal form of usury.

This bank practiced fractional lending at a 10:1 rate, ten dollars of loans for each dollar they had on deposit. This misuse and abuse of their public charter continued for the entire 20 years of their existence. Public outrage over these abuses was such that the charter was not renewed and the bank ceased to exist in 1811.

The war of 1812 left the country in economic chaos, seen by bankers as another opportunity for easy profits. They influenced Congress to charter the second central bank, the Second Bank of the United States (SBUS), in 1816.

The SBUS was more expansive than the BUS. The SBUS sold franchises and literally doubled the number of banks in a short period of time. The country began to boom and move westward, which required money. Using fractional lending at the 10:1 rate, the central bank and their franchisees created the debt/money for the expansion.

Things boomed for a while, then the banks decided to shut off the debt/money, citing the need to control inflation. This action on the part of the SBUS caused bankruptcies and foreclosures. The banks then took control of the assets that were used as security against the loans.

Closely examine how the SBUS engineered this cycle of prosperity and depression. The central bank caused inflation by creating debt/money for loans and credit and making these funds readily available. The economy boomed. Then they used the inflation which they created as an excuse to shut off the loans/credit/money.

The resulting shortage of cash caused the economy to falter or slow dramatically and large numbers of business and personal bankruptcies resulted. The central bank then seized the assets used as security for the loans. The wealth created by the borrowers during the boom was then transferred to the central bank during the bust. And you always wondered how the big guys ended up with all the marbles.

Now, who do you think is responsible for all of the ups and downs in our economy over the last 85 years? Think about the depression of the late '20s and all through the '30s. The FED could have pumped lots of debt/money into the market to stimulate the economy and get the country back on track, but did they? No; in fact, they restricted the money supply quite severely. We all know the results that occurred from that action, don't we?

Why would the FED do this? During that period asset values and stocks were at rock bottom prices. Who do you think was buying everything at 10 cents on the dollar? I believe that it is referred to as consolidating the wealth. How many times have they already done this in the last 85 years?

Do you think they will do it again?

Just as an aside at this point, look at today's economy. Markets are declining. Why? Because the FED has been very liberal with its debt/credit/money. The market was hyper inflated. Who creates inflation? The FED. How does the FED deal with inflation? They restrict the debt/credit/money. What happens when they do that? The market collapses.

Three years back, after certain central banks said they would be selling large quantities of gold, the price of gold fell to a 25-year low of about $260 per ounce. The central banks then bought gold. After buying at the bottom, a group of 15 central banks announced that they would be restricting the amount of gold released into the market for the next five years. The price of gold went up $75.00 per ounce in just a few days. How many hundreds of billions of dollars did the central banks make with those two press releases?

Gold is generally considered to be a hedge against more severe economic conditions. Do you think that the private banking families that own the FED are buying or selling equities at this time? (Remember: buy low, sell high.) How much money do you think these FED owners have made since they restricted the money supply at the top of this last current cycle?

Alan Greenspan has said publicly on several occasions that he thinks the market is overvalued, or words to that effect. Just a hint that he will raise interest rates (restrict the money supply), and equity markets have a negative reaction.

Governments and politicians do not rule central banks, central banks rule governments and politicians. President Andrew Jackson won the presidency in 1828 with the promise to end the national debt and eliminate the SBUS. During his second term President Jackson withdrew all government funds from the bank and on January 8, 1835, paid off the national debt. He is the only president in history to have this distinction. The charter of the SBUS expired in 1836.

Without a central bank to manipulate the supply of money, the United States experienced unprecedented growth for 60 or 70 years, and the resulting wealth was too much for bankers to endure. They had to get back into the game. So, in 1910 Senator Nelson Aldrich, then Chairman of the National Monetary Commission, in collusion with representatives of the European central banks, devised a plan to pressure and deceive Congress into enacting legislation that would covertly establish a private central bank.

This bank would assume control over the American economy by controlling the issuance of its money. After a huge public relations campaign, engineered by the foreign central banks, the Federal Reserve Act of 1913 was slipped through Congress during the Christmas recess, with many members of the Congress absent. President Woodrow Wilson, pressured by his political and financial backers, signed it on December 23, 1913.

Recommend you all read "The Creature from Jekyll Island" by Edward Griffin, so you understand the FED and how it was created and by whom.

The act created the Federal Reserve System, a name carefully selected and designed to deceive. "Federal" would lead one to believe that this is a government organization. "Reserve" would lead one to believe that the currency is being backed by gold and silver. "System" was used in lieu of the word "bank" so that one would not conclude that a new central bank had been created.

In reality, the act created a private, for profit, central Banking Corporation owned by a cartel of private banks. Who owns the FED? The Rothschilds of London and Berlin; Lazard Brothers of Paris; Israel Moses Seif of Italy; Kuhn, Loeb and Warburg of Germany; and the Lehman Brothers, Goldman, Sachs and the Rockefeller families of New York.

Did you know that the FED is the only for-profit corporation in America that is exempt from both federal and state taxes? The FED takes in about one trillion dollars per year tax free! The banking families listed above get all that money.

Almost everyone thinks that the money they pay in taxes goes to the US Treasury to pay for the expenses of the government. Do you want to know where your tax dollars really go? If you look at the back of any check made payable to the IRS you will see that it has been endorsed as "Pay Any F.R.B. Branch or Gen. Depository for Credit U.S. Treas. This is in Payment of U.S. Oblig." Yes, that's right, every dime you pay in income taxes is given to those private banking families, commonly known as the FED, tax free.

Like many of you, I had some difficulty with the concept of creating money from nothing. You may have heard the term "monetizing the debt," which is kind of the same thing. As an example, if the US Government wants to borrow $1 million the government does borrow every dollar it spends they go to the FED to borrow the money. The FED calls the Treasury and says print 10,000 Federal Reserve Notes (FRN) in units of one hundred dollars.

The Treasury charges the FED 2.3 cents for each note, for a total of $230 for the 10,000 FRNs. The FED then lends the $1 million to the government at face value plus interest. To add insult to injury, the government has to create a bond for $1 million as security for the loan. And the rich get richer. The above was just an example, because in reality the FED does not even print the money; it's just a computer entry in their accounting system. To put this on a more personal level, let's use another example.

Today's banks are members of the Federal Reserve Banking System. This membership makes it legal for them to create money from nothing and lend it to you. Today's banks, like the goldsmiths of old, realize that only a small fraction of the money deposited in their banks is ever actually withdrawn in the form of cash. Only about 3 or 4 percent of all the money that exists is in the form of currency. The rest of it is simply a computer entry.

Let's say you're approved to borrow $10,000 to do some home improvements. You know that the bank didn't actually take $10,000 from its pile of cash and put it into your pile? They simply went to their computer and input an entry of $10,000 into your account. They created, from thin air, a debt, which you have to secure with an asset and repay with interest. The bank is allowed to create and lend as much debt as they want as long as they do not exceed the 10:1 ratio imposed by the FED.

It sort of puts a new slant on how you view your friendly bank, doesn't it? How about those loan committees that scrutinize you with a microscope before approving the loan they created from thin air. What a hoot! They make it complex for a reason. They don't want you to understand what they are doing. People fear what they do not understand. You are easier to delude and control when you are ignorant and afraid.

Now to put the frosting on this cake. When was the income tax created? If you guessed 1913, the same year that the FED was created, you get a gold star. Coincidence? What are the odds? If you are going to use the FED to create debt, who is going to repay that debt? The income tax was created to complete the illusion that real money had been lent and therefore real money had to be repaid. And you thought Houdini was good.

So, what can be done? My father taught me that you should always stand up for what is right, even if you have to stand up alone.

If "We the People" don't take some action now, there may come a time when "We the People" are no more. You should write a letter or send an email to each of your elected representatives. Many of our elected representatives do not understand the FED. Once informed they will not be able to plead ignorance and remain silent. This petition will be sent to all members of Congress, do your part and sign this petition.

Article 1, Section 8 of the US Constitution specifically says that Congress is the only body that can "coin money and regulate the value thereof." The US Constitution has never been amended to allow anyone other than Congress to coin and regulate currency.

Ask your representative, in light of that information, how it is possible for the Federal Reserve Act of 1913, and the Federal Reserve Bank that it created, to be constitutional. Ask them why this private banking cartel is allowed to reap trillions of dollars in profits without paying taxes. Insist on an answer.

Thomas Jefferson said, "If the America people ever allow private banks to control the issuance of their currencies, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of all their prosperity until their children will wake up homeless on the continent their fathers conquered."

Jefferson saw it coming 150 years ago. The question is, "Can you now see what is in store for us if we allow the FED to continue controlling our country?"

"The condition upon which God hath given liberty to man is eternal vigilance; which condition if he breaks, servitude is at once the consequence of his crime, and the punishment of his guilt."


Web Link

Comments (18)

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Posted by Stacey
a resident of Amberwood/Wood Meadows
on Oct 1, 2009 at 12:31 am

Stacey is a registered user.

This article misses a lot more details. One must learn a little about Chicago and Austrian economic schools of thought to grasp more about this. The system is called "fractional reserve", not just "fractional". It means that the bank only holds a fraction of the money in reserve, meaning that if there's a run on the bank (everyone wants to withdraw their money at once), it is impossible for the bank to comply (and thus we have FDIC). This article doesn't mention that the US banks run at a high ratio of amount held in reserve to amount loaned out. European banks run even higher while Canadian banks are more conservative and run at much lower ratios. These high ratios are what contribute to bank closures.

The Chicago school of economic thought is prevalent. In the Austrian school, the prime interest rate is set through the free market; the belief being that such pricing leads to less drastic fluctuations. Now since we, as a country, control the interest rate through policy instead of market pressures, it requires certain regulations to be in place. These regulations, such as the Glass-Steagall Act, were removed by a Republican-controlled Congress and signed by Democrat President Bill Clinton. That's a really backwards way to go about it. The Fed control over the prime interest rate should have been revoked first before the financial industry de-regulation that has been going on since the time of Reagan.

Fractional reserve banking is a way to create wealth. Someone deposits $100,000. The bank holds 50% of that in reserve and loans out the other 50% at 6% interest. The bank just made money on the interest. They pay the depositor a portion of that interest.


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Posted by Stacey
a resident of Amberwood/Wood Meadows
on Oct 1, 2009 at 12:35 am

Stacey is a registered user.

Artificially low interest rates caused by Fed policy send investors looking for investment vehicles with higher interest rates. Enter the derivatives market, enabled by repeal of the Glass-Steagall Act...


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Posted by Stacey
a resident of Amberwood/Wood Meadows
on Oct 1, 2009 at 12:41 am

Stacey is a registered user.

P.S. Web Link

The American School included three cardinal policy points:

1. Support industry: The advocacy of protectionism, and opposition to free trade - particularly for the protection of "infant industries" and those facing import competition from abroad. Examples: Tariff of 1816 and Morrill Tariff
2. Create physical infrastructure: Government finance of internal improvements to speed commerce and develop industry. This involved the regulation of privately held infrastructure, to ensure that it meets the nation's needs. Examples: Cumberland Road and Union Pacific Railroad
3. Create financial infrastructure: A government sponsored National Bank to issue currency and encourage commerce. This involved the use of sovereign powers for the regulation of credit to encourage the development of the economy, and to deter speculation. Examples: First Bank of the United States, Second Bank of the United States, and National Banking Act[12]


 +   Like this comment
Posted by Stacey
a resident of Amberwood/Wood Meadows
on Oct 1, 2009 at 12:48 am

Stacey is a registered user.

I just want to clarify, I don't feel informed enough about economic workings and I won't pretend to be. This stuff is just interesting to me. I don't know which school of thought is closer to reality: Chicago or Austrian, only that a patchwork system doesn't seem to work too well. If you're going to control the interest rate through policy then you've got to have other legislation in place otherwise you have to go 180 degrees in the opposite direction. It can't be both ways.


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Posted by Stacey
a resident of Amberwood/Wood Meadows
on Oct 1, 2009 at 12:55 am

Stacey is a registered user.

Austrian School: Web Link
Chicago School: Web Link


 +   Like this comment
Posted by mac
a resident of Another Pleasanton neighborhood
on Oct 1, 2009 at 9:05 am

mac is a registered user.

Great posts. Mine is simpler. While I'm certain much time was spent in the name alone of "Federal Reserve Bank" it is misleading at the onset. It is neither Federal, a reserve, or a bank. Some call that part of the spin that we have come to know in our daily lives of the way this country operates both publicly and privately. It would seem so.


 +   Like this comment
Posted by M
a resident of Another Pleasanton neighborhood
on Oct 1, 2009 at 11:01 am

GREAT POSTS on everyone part. Ron Paul just released his book END THE FED. Another great source: MONEY MASTERS Video (YouTube and torrent) ... most important is that the issue of MONEY is becoming an issue, along with the understanding of how Money works. This is a first for the American Public. If you were to ask a person about economics/finance/money their eyes would glaze over and then they would add: "I just want a lot of it". This is the first time in cultural history where the mystery is being revealed. I know since my adventure into learning about Money my world view has changed radically. Mark ... impressive ... Stacey ... I follow your posts BUT I have to say these blew me away!!!!


 +   Like this comment
Posted by Lois
a resident of Another Pleasanton neighborhood
on Oct 1, 2009 at 5:17 pm

My eyes do glaze over when reading this. I don't feel interested enough to figure it out. Tell me why I should be interested.


 +   Like this comment
Posted by m
a resident of Another Pleasanton neighborhood
on Oct 1, 2009 at 7:15 pm

Because it fundamentally affects yours and your children's LIVELIHOOD


 +   Like this comment
Posted by mark
a resident of another community
on Oct 1, 2009 at 11:00 pm

Stacy said:

"Fractional reserve banking is a way to create wealth. Someone deposits $100,000. The bank holds 50% of that in reserve and loans out the other 50% at 6% interest. The bank just made money on the interest. They pay the depositor a portion of that interest."


Stacy, that is not how it works here in the USA. Here is a quote from the article, the next two paragraphs:

"Today's banks are members of the Federal Reserve Banking System. This membership makes it legal for them to create money from nothing and lend it to you. Today's banks, like the goldsmiths of old, realize that only a small fraction of the money deposited in their banks is ever actually withdrawn in the form of cash. Only about 3 or 4 percent of all the money that exists is in the form of currency. The rest of it is simply a computer entry.

Let's say you're approved to borrow $10,000 to do some home improvements. You know that the bank didn't actually take $10,000 from its pile of cash and put it into your pile? They simply went to their computer and input an entry of $10,000 into your account. They created, from thin air, a debt, which you have to secure with an asset and repay with interest. The bank is allowed to create and lend as much debt as they want as long as they do not exceed the 10:1 ratio imposed by the FED."



With a 10:1 ratio, the bank only needs $100 on hand to loan out $1000. In reality, the money you borrowed to buy your house, never existed, but was made out of thin air. Fractional Reserve Banking only creates wealth for the banksters and is criminal. They are in fact counterfeiters and stealing the real wealth of this country.

There is a lot of info in the article, and it wouldn't hurt to read it again. I now see where the author could have explained some things better, as there is much more to this. Like he said:

"It sort of puts a new slant on how you view your friendly bank, doesn't it? How about those loan committees that scrutinize you with a microscope before approving the loan they created from thin air. What a hoot! They make it complex for a reason. They don't want you to understand what they are doing. People fear what they do not understand. You are easier to delude and control when you are ignorant and afraid."


He also used one of Thomas Jeffersons quotes, which I have also used and is the truth of the matter:


Thomas Jefferson said, "If the America people ever allow private banks to control the issuance of their currencies, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of all their prosperity until their children will wake up homeless on the continent their fathers conquered."

I don't think I can stress enough, how important of an issue this is to all of us, and why we need to end the FED. The Bansksters that own the Fed, have control of our country because they control the money system, which is their money system.


Here is a link to a video that probably is far better than the article in presenting the facts about the FED. This video is like no other, for most it will prove to be shocking. A must watch:

Web Link


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Posted by BW
a resident of another community
on Oct 1, 2009 at 11:15 pm

Many of the facts here are wrong. What we normally call the Fed is not privately owned at all -- it is a government institution that runs the Federal Reserve System. The Fed is run and staffed by federal employees. Ben Bernanke, for instance, is an employee of the U.S. government.

Many of the banking functions of the Federal Reserve System are performed by privately owned regional Federal Reserve banks. There are 12 of them. However, they are not owned by banking "families." They are owned by the banks that are regulated by the Fed. So, yes, Citibank owns some of one of the Federal Reserve Banks. So does every bank, large or small.

However, the banks that "own" the Fed do not actually control it. Their ownership consists of non-voting shares of stock -- shares that entitle them to a 6% dividend. In return for that dividend, the banks must perform many functions, including providing interest-free reserves for the central banks. Have you heard about how the Fed is going to raise more money by drawing capital from the member banks? Well, what that means is that the member banks have to allocate more capital to the reserve banks to replenish the reserves.

The member banks do not have any right to profits beyond the 6% dividend. So all "profits" of the Federal Reserve System go into the US Treasury.

The Fed is not part of any conspiracy. Sure, some rich bankers 100 years ago tried to create one, but remember why this country is great. We have a great political system that doesn't let that sort of thing go on. When the bankers tried to push through their system, Congress did not go for it. It used more or less the plan proposed by the bankers, except they made all of the important parts of it (i.e the profits and control of the system) owned by the people.

If you don't believe me, feel free to read the text of the Federal Reserve Act. It's available here. Web Link


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Posted by Stacey
a resident of Amberwood/Wood Meadows
on Oct 1, 2009 at 11:21 pm

Stacey is a registered user.

Mark,

Actually, I describe exactly the same process as what is written in the article, only I wasn't using a 10:1 ratio nor so much hyperbole.

Note this line: "The bank is allowed to create and lend as much debt as they want as long as they do not exceed the 10:1 ratio imposed by the FED"


 +   Like this comment
Posted by Stacey
a resident of Amberwood/Wood Meadows
on Oct 1, 2009 at 11:24 pm

Stacey is a registered user.

Who really thinks that some bank grunt sits at a computer terminal and types in $10,000 and "creates money out of thin air"? Man, if I were that guy I'd be typing in a lot more zeros.


 +   Like this comment
Posted by Stacey
a resident of Amberwood/Wood Meadows
on Oct 1, 2009 at 11:40 pm

Stacey is a registered user.

Lois,

Yes, it can be difficult to understand. We grow up in this system and we don't understand how it works. No, it isn't entirely necessary to know in order to run your life, but understanding some of the reasoning behind certain political stances (or your financial health) can be empowering. Wikipedia is a good place to start.


 +   Like this comment
Posted by Stacey
a resident of Amberwood/Wood Meadows
on Oct 1, 2009 at 11:42 pm

Stacey is a registered user.

It is a little like language. You can study grammar in school, but it isn't necessary to know grammar in order to speak. But only those who have studied grammar go on to become writers, poets, and otherwise influential people.


 +   Like this comment
Posted by mark
a resident of another community
on Oct 2, 2009 at 5:18 am

Well I can tell that none of you watched the video I posted in in my reply above. It appears to me that none of you seem to think is effects you, so sad. Maybe you dont think you can handle the shock that I promised, who knows?

Albert Einstein said "Those that refuse to checkout the facts of an arguement are the height of ignorance".


Now regarding

Posted by BW, a resident of another community, 5 hours ago

Many of the facts here are wrong. What we normally call the Fed is not privately owned at all -- it is a government institution that runs the Federal Reserve System. The Fed is run and staffed by federal employees. Ben Bernanke, for instance, is an employee of the U.S. government.

I don't know where you get your info, but I got to tell you, you could not be any more mistaken, and about everything. I am interested in hearing where you got that info, so if you don't mind, would you post it up here. I've only dedicated probably 10,000 hours since 9/11/2001 into researching this and other relevant issues so to say that I am interested does not begin to tell the story.

Thanks in advance Mark


 +   Like this comment
Posted by Bill Rummel
a resident of Castlewood
on Oct 2, 2009 at 7:22 am

Web Link


 +   Like this comment
Posted by mark
a resident of another community
on Oct 4, 2009 at 4:04 pm

Thanks Bill


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