The Bankers Capture the Money
excerpted from the book
Web of Debt
The Shocking Truth About Our Money
System And How We Can Break Free
by Ellen Hodgson Brown
Third Millennium Press, 2007,
Home foreclosures and evictions were occurring in record numbers
[in the 1890s]. A document called "The Bankers Manefesto
of 1892" suggested that it was all part of a deliberate plan
by the bankers to disenfranchise the farmers and laborers of their
homes and property. This is another document with obscure origins,
but its introduction to Congress is attributed to Representative
Charles Lindbergh Sr., the father of the famous aviator, who served
in Congress between 1903 and 1913. The Manifesto read in part:
We must proceed with caution and guard
every move made, for the lower order of people are already showing
signs of restless commotion .... The Farmers Alliance and Knights
of Labor organizations in the United States should be carefully
watched by our trusted men, and we must take immediate steps to
control these organizations in our interest or disrupt them...
Capital [the bankers and their money] must protect itself in every
possible manner through combination [monopoly] and legislation.
The courts must be called to our aid, debts must be collected,
bonds and mortgages foreclosed as rapidly as possible. When through
the process of the law, the common people have lost their homes,
they will be more tractable and easily governed through the influence
of the strong arm of the government applied to a central power
of imperial wealth under the control of the leading financiers.
People without homes will not quarrel with their leaders.'
The Bankers Manefesto of 1892
[While] our principal men ... are engaged
in forming an imperialism of the world ... the people must be
kept in a state of political antagonism... By thus dividing voters,
we can get them to expend their energies in fighting over questions
of no importance to us... Thus, by discrete action, we can secure
all that has been so generously planned and successfully accomplished.
Those is positions of real power, the
bankers, the CEOs, are not vulnerable to the vote, and in any
case they fund both sides.
President Theodore Roosevelt in 1906
Behind the ostensible government sits
enthroned an invisible government owing no allegiance and acknowledging
no responsibility to the people [corporate monopolies/trusts].
To destroy this invisible government, to befoul the unholy alliance
between corrupt business and corrupt politics is the first task
of the statesmanship of the day.
Congressman Wright Patman, Chairman of the House Banking and Currency
Committee, in a speech on the House floor in 1967
In the U.S. today, we have in effect two
governments. We have the duly constituted government, then we
have an independent, uncontrolled and uncoordinated government
in the Federal Reserve, operating the money powers which are reserved
to congress by the Constitution.
Mayor John Hylan of New York, 1927, in a speech in the New York
The warning of Theodore Roosevelt has
much timeliness today, for the real menace of our republic is
this invisible government which like a giant octopus sprawls its
slimy length over City, State, and nation... It seizes in its
long and powerful tentacles our executive officers, our legislative
bodies, our schools, our courts, our newspapers, and every agency
created for the public protection.
[At] the head of this octopus are the
Rockefeller-Standard Oil interest and a small group of powerful
banking houses generally referred to as the international bankers.
The little coterie of powerful international bankers virtually
run the United States government for their own selfish purposes.
They practically control both parties,
write political platforms, make catspaws of party leaders, use
the leading men of private organizations, and resort to every
device to place in nomination for high public office only such
candidates as will be amenable to the dictates of corrupt big
These international bankers and Rockefeller-Standard
Oil interests control the majority of the newspapers and magazines
in this country. They use the columns of these papers to club
into submission or drive out of office public officials who refuse
to do the bidding of the powerful corrupt cliques which compose
the invisible government.
Monopoly the growth and abuse were at their height in the Gilded
Age, the country's greatest period of laissez faire. he trusts
were so powerful that the trend toward monopolizing industry actually
worsened after the Sherman Act was passed)Before 1898, there were
an average of 46 major industrial mergers a year. After 1898,
the number soared to 531 a year. By 1904, the top 4 percent of
American businesses produced 57 percent of America's total industrial
production, with a single firm dominating at least 60 percent
of production in 50 different industries. Ironically the trusts
became the strongest advocates of federal regulation, since their
monopoly power depended on the exclusive rights granted them by
the government. By planting their own agents in the federal commissions,
they used government regulation to gain greater control over industry,
protect themselves from competition, and maintain high prices.
There were many Robber Barons, but J. Pierpont Morgan, Andrew
Carnegie, and John D. Rockefeller led the pack. Morgan dominated
finance, Carnegie dominated steel, and Rockefeller monopolized
oil. Carnegie built his business himself, and he loved competition;
but Morgan was a different type of capitalist. He didn't build,
he bought. He took over other people's businesses, and he hated
competition. In 1901, Morgan formed the first billion dollar corporation,
U.S. Steel, out of mills he purchased from Carnegie.
Rockefeller, too, dealt with competitors
by buying them out. His company, Standard Oil, became the greatest
of all monopolies and the first major multinational corporation.
Before World War I, the financial and business structure of the
United States was dominated by Morgan's finance and transportation
companies and Rockefeller's Standard Oil; and these conglomerates
had close alliances with each other. Through interlocking directorships,
they were said to dominate almost the entire economic fabric of
the United States.
Other industrialists, seeing the phenomenal
success of the Morgan and Rockefeller trusts, dreamt of buying
out their competition and forming huge monopolies in the same
way. But with the exception of Carnegie, no other capitalists
had the money for these predatory practices. Aspiring empire-builders
were therefore drawn to Morgan and the other Wall Street bankers
in search of funding.
... Those fortunate corporations favored
with funding from Morgan and the other Wall Street bankers were
able to monopolize their industries. But where did the Wall Street
banks get the money to underwrite all these mergers and acquisitions?
The answer was revealed by Congressman Wright Patman and other
close observers: the Robber Barons were pulling money out of an
empty hat. Their privately owned banks held the ultimate credit
card, a bottomless source of accounting-entry money that could
be "lent" to their affiliated corporate mistresses.
The funds could then be used to buy out competitors, corner the
market in scarce raw materials, make political donations, lobby
Congress, and control public opinion.
Although the Rothschilds were technically rivals of the Peabody/Morgan
firm, rumor had it that they had formed a secret alliance... That
could explain why, in the periodic financial crises of the Gilded
Age, Morgan's bank always came out on top. In the bank panics
of 1873, 1884, 1893, and 1907, while other banks were going under,
Morgan's bank always managed to come up with the funds to survive
By 1890, Rockefeller owned all of the independent oil refiners
in country and had a monopoly on worldwide oil sales. In 1911,
the U.S. Supreme Court ruled that the Standard Oil cartel was
a "dangerous conspiracy" that must be broken up "for
the safety of the Republic."... In 1914, Standard Oil was
referred to in the Congressional Record as the "shadow government."
Following the Court's antitrust order, the Standard Oil monolith
was split into 38 new companies, including Exxon, Mobil, Amoco,
Chevron, and Arco; but Rockefeller secretly continued to control
them by owning a voting majority of their stock.
The Federal Reserve Act of 1913 was a major coup for the international
bankers. They had battled for more than a century to establish
a private central bank with the exclusive right to "monetize"
the government's debt (that is, to print their own money and exchange
it for government securities or I.O.U.s). The Act's preamble said
that its purposes were "to provide for the establishment
of Federal Reserve Banks, to furnish an elastic currency, to afford
a means of rediscounting commercial paper, to establish a more
effective supervision of banking in the United States, and for
other purposes." It was the beginning of Fedspeak, abstract
economic language that shrouded the issues in obscurity. "Elastic
currency" is credit that can be expanded at will by the banks.
"Rediscounting" is a technique by which banks are allowed
to magically multiply funds by re-lending them without waiting
for outstanding loans to mature. In plain English, the Federal
Reserve Act authorized a private central bank 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.
Representative Charles Lindbergh Sr., who served in Congress between
1903 and 1913, called the Federal Reserve Act of 1913, "the
worst legislative crime of the ages." He warned:
[The Federal Reserve Board] can cause
the pendulum of a rising and falling market to swing gently back
and forth by slight changes in the discount rate, or cause violent
fluctuations by greater rate variation, and in either case it
will possess inside information as to financial conditions and
advance knowledge of the coming change, either up or down.
This is the strangest, most dangerous
advantage ever placed in the hands of a special privilege class
by any Government that ever existed .... The financial system
has been turned over to ... a purely profiteering group. The system
is private, conducted for the sole purpose of obtaining the greatest
possible profits from the use of other people's money.
Representative Louis McFadden, 1934, stating in the Congressional
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 domes tic speculators and swindlers; and rich and predatory
money lenders. In that dark crew of financial pirates there are
those who would cut a man's throat to get a dollar out of his
pocket; there are those who send money into states to buy votes
to control our legislatures; there are those who maintain International
propaganda for the purpose of deceiving us into granting of new
concessions which will permit them to cover up their past misdeeds
and set again in motion their gigantic train of crime. These twelve
private credit monopolies were deceitfully and disloyally foisted
upon this Country by the hankers who came here from Europe and
repaid its our hospitality by undermining our American institutions.
The "Federal" Reserve is actually an independent, privately-owned
corporation. It consists of twelve regional Federal Reserve banks
owned by many commercial member banks, which hold Federal Reserve
stock in an amount proportional to their size. The Federal Reserve
Bank of New York holds the majority of shares in the Federal Reserve
System (53 percent). Its largest shareholders are the largest
commercial banks in the district of New York.
In 1997, the New York Federal Reserve
reported that its three largest member banks were Chase Manhattan
Bank, Citibank, and Morgan Guaranty Trust Company.
The Federal Reserve is owned by Federal Reserve Banks, which are
owned by American commercial banks, which are required by law
to make their major shareholders public; and none of these banks
is predominantly foreign-owned. That does not mean, however, that
the banking spider is not in control behind the scenes. According
to Hans Schicht ... the "master spider" has just moved
to Wall Street. The greater part of U.S. banking and enterprise,
says Schicht, is now controlled by a very small inner circle of
men, perhaps headed by only one man. It is all done behind closed
doors, through the game he calls "spider webbing." ...
the rules of the game include exercising tight personal management
and control, with a minimum of insiders and front-men who themselves
have only partial knowledge of the game; exercising control through
"leverage" (mergers, takeovers, chain share holdings
where one company holds shares of other companies, conditions
annexed to loans, and so forth); and making any concentration
of wealth invisible. The master spider studiously avoids close
scrutiny by maintaining anonymity, taking a back seat, and appearing
to be a philanthropist.
Before World War II, the reins of international
finance were held by the powerful European banking dynasty the
House of Rothschild; but during the war, control crossed the Atlantic
to their Wall Street affiliates. The role of master spider, says
Schicht, fell to David Rockefeller Sr., grandson on his father's
side of john D. Rockefeller Sr. and on his mother's side of Nelson
Aldrich, the Senator for whom the precursor to the Federal Reserve
Act was named. David Rockefeller was a director of the Council
on Foreign Relations from 1949 to 1985 and its chairman from 1970
until 1985; he founded the Trilateral Commission in 1976; and
he was instrumental in convoking the 1944 Bretton Woods Conference,
at which the International Monetary Fund and the World Bank were
devised, and in founding the elite international club called the
"Bilderbergers." The Council on Foreign Relations (CFR)
is an') international group set up in 1919 to advise the members'
respective governments on international affairs. It has been called
the preeminent ( intermediary between the world of high finance,
big oil, corporate elitism, and the U.S. government. The policies
it promulgates in its quarterly journal become U.S. government
The Trilateral Commission has been described
as an elite group of international bankers, media leaders, scholars
and government officials bent on shaping and administering a "new
world order," with a central world government held together
by economic interdependence. Former presidential candidate Barry
Goldwater said of it:
The Trilateralist Commission is international
[and] is intended to be the vehicle for multinational consolidation
of commercial and banking interests by seizing control of the
political government of the United States. The Trilateralist Commission
represents a skillful, coordinated effort to seize control and
consolidate the four centers of power - political, monetary, intellectual,
Professor Carroll Quigley in his book Tragedy and Hope
The powers of financial capitalism had
another far-reaching aim, nothing less than to create a world
system of financial control in private hands able to dominate
the political system of each country and the economy of the world
as a whole. This system was to be controlled in a feudalist fashion
by the central banks of the world acting in concert, by secret
agreements arrived at in frequent private meetings and conferences.
The apex of the system was to he the Bank for International Settlements
in Basel, Switzerland, a private bank owned and controlled by
the world's central banks which were themselves private corporations.
Asia Times economist Henry C K Liu wrote in an article titled
"The BIS [Bank of International Settlements] vs. National
Banks", Asia Times, May 14, 2002
National banking systems are suddenly
thrown into the rigid arms of the Basel Capital Accord sponsored
by the Bank of International Settlements (BIS), or to face the
penalty of usurious risk premium in securitizing international
bank loans. Thus national banking systems are all forced to march
to the same tune, designed to serve the needs of highly sophisticated
global financial markets, regardless of the developmental needs
of their national economies .... National policies suddenly are
subjected to profit incentives of private financial institutions,
all members of a hierarchical system controlled and directed from
the money center banks in New York. The result is to force national
banking systems to privatize .... National economies under financial
globalization no longer serve national interests. They operate
to strengthen... US financial hegemony in the name of private
profit... Reversing the logic that a sound banking system should
lead to full employment and developmental growth, BIS regulations
demand high unemployment and developmental degradation / in national
economies as the fair price for a sound global private banking
The Bilderberger group in a June 2004 BBC special
... "an elite coterie of Western
thinkers and power-brokers" who have been "accused of
fixing the fate of the world behind closed doors." The group
has been suspected of steering international policy and plotting
world domination. But nobody knows for sure, because its members
are sworn to secrecy, and the press won't report on its meetings.
U.S. Congressman Oscar Callaway. 1917 stated on the Congressional
In March, 1915, the J.P. Morgan interests,
the steel, shipbuilding, and powder interests, and their subsidiary
organizations, got together 12 men high up in the newspaper world,
and employed them to select the most influential newspapers in
the United States and sufficient number of them to control generally
the policy of the daily press of the United States .... They found
it was only necessary to purchase the control of 25 of the greatest
papers. The 25 papers were agreed upon; emissaries were sent to
purchase the policy, national and international, of these papers;
... an editor was furnished for each paper to properly supervise
and edit information regarding the questions of preparedness,
militarism, financial policies, and other things of national and
international nature considered vital to the interests of the
purchasers [and to suppress] everything in opposition to the wishes
of the interests -served.
historian Howard Zinn
Whether you have a Republican a Democrat
in power, the Robber Barons are still there... Under the Clinton
administration, more mergers of huge corporations took place [than]
had ever taken place before under any administration... Whether
you have Republicans or Democrats in power, big business is the
most powerful voice in the halls of Congress and in the ears of
the President of the United States.
In The Underground History of American Education (2000), educator
John Taylor Gatto traces how Rockefeller, Morgan and other members
of the financial elite influenced, guided, funded, and at times
forced compulsory schooling into mainstream America. They needed
three things for their corporate interests to thrive: (1) compliant
employees, (2) a guaranteed and dependent population, and (3)
a predictable business environment. It was largely to promote
these ends, says Gatto, that modern compulsory schooling was established.
in 1895, in Pollock v Farmer's Loan & Trust Co. the Court
held that general income taxes violate the constitutional guideline
that taxes levied directly on the people are to be levied in proportion
to the population of each State.
That ruling has never been overruled instead,
the Wall Street faction decided to make an end run around the
Constitution. In 1913, the Sixteenth Amendment was introduced
to Congress as a package deal along with the Federal Reserve Act.
Both were supported by the Wall Street Senator, Nelson Aldrich.
The Amendment provided:
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.
Wealthy businessmen who had opposed a
federal income tax were won over when they learned they could
avoid paying the tax themselves by setting up tax-free foundations.
The tax affected only incomes over $4,000 a year, a sum that was
then well beyond the wages of most Americans. The Amendment was
simply worded, the tax return was only one page long, and the
entire Tax Code was only 14 pages long. It seemed harmless enough
at the time ....
... The Tax Code is now a 17,000-page
sieve of obscure legalese, providing enormous loopholes for those
who can afford the lobbyists to negotiate them.
A report issued by the Grace Commission during the Reagan Administration
concluded that most federal income tax revenues go just to pay
the interest on the government's burgeoning debt. Indeed, that
was the purpose for which the tax was originally designed. When
the federal income tax was instituted in 1913, all income tax
collections were forwarded directly to the Federal Reserve. In
fiscal year 2005, the U.S. government spent $352 billion just
to service the government's debt. The sum represented more than
one-third of individual income tax revenues t bat year, which
totaled $927 billion.
As for the other two-thirds of the individual
income tax tab, the Grace Commission concluded that those payments
did not go to service necessary government operations either.
A cover letter addressed to President Reagan stated that a third
of all income taxes were consumed by waste and inefficiency in
the federal government. Another third of any taxes actually paid
went to make up for the taxes not paid by tax evaders and the
burgeoning underground economy, a phenomenon that had blossomed
in direct proportion to tax increases. The report concluded:
With two-thirds of everyone's personal
income taxes wasted or not collected, 100 percent of what is collected
is absorbed solely by interest on the Federal debt and by Federal
Government contributions to transfer payments. In other words,
all individual income tax revenues are gone before one nickel
is spent on the services which taxpayers expect from their Government."
Even the third going for interest on the
federal debt could have been avoided, if Congress had created
the money itself on the Franklin/ Lincoln model. But the obscurely-worded
Federal Reserve Act delegated the power to create money to a private
banking monopoly; and Congress, like the sleeping public, had
been deceived by the bankers' sleight of hand. The head had thundered
and the walls had shook.
Representative Charles Lindbergh Sr. warned on the day the Federal
Reserve Act was passed:
This [Federal Reserve] Act establishes
the most gigantic trust on earth. When the President signs this
bill, the invisible government by the Monetary Power will be legalized.
The people may not know it immediately, but the day of reckoning
is only a few years removed.
The stock market held little interest for most people until the
Robber Barons started promoting it, after amassing large stock
holdings very cheaply themselves. They sold the public on the
idea that it was possible to get rich quick by buying stock on
"margin" (Or on credit). The investor could put a down
payment on the stock and pay off the balance after its price went
up, reaping a hefty profit. This investment strategy turned the
stock market into a speculative pyramid scheme, in which most
of the money invested did not actually exist.' People would open
margin accounts, not because they could not afford to pay 100
percent of the stock price, but because it allowed them to leverage
their investments, buying ten times as much stock by paying only
a 10 percent down payment. The public went wild over this scheme.
In a speculative fever, many people literally "bet the farm."
They were taking out loans against everything they owned - homes,
farms, life insurance - anything to get the money to get into
the market and make more money.
A scheme [was established] between Benjamin Strong, then Governor
of the Federal Reserve Bank of New York, and Montagu Norman, head
of the Bank of England, to deliver control of the financial systems
of the world to a small group of private central bankers.
... In February 1929, Norman and Strong
concluded that a collapse in the market was inevitable and that
the best course was to let it correct "naturally" (naturally,
that is, with a little help from the Fed). They sent advisory
warnings to lists of preferred customers, including wealthy industrialists,
politicians, and high foreign officials, telling them to get out
of the market. Then the Fed began selling government securities
in the open market, reducing the money supply by reducing the
reserves available for backing loans. The bank-loan rate was also
increased, causing rates on brokers' loans to jump to 20 percent.
The result was a huge liquidity squeeze
- a lack of available money. Short-term loans suddenly became
available only at much higher interest rates, making buying stock
on margin much less attractive. As fewer people bought, stock
prices fell, removing the incentive for new buyers to purchase
the stocks bought by earlier buyers on margin. Many investors
were forced to sell at a loss by "margin calls" (calls
by brokers for investors to bring the cash in their margin accounts
up to a certain level after the value of their stocks had fallen).
The panic was on, as investors rushed to dump their stocks for
whatever they could get for them. The stock market crashed overnight.
People withdrew their savings from the banks and foreigners withdrew
their gold, further depleting the reserves on which the money
stock was built. From 1929 to 1933, the money stock fell by a
third, and a third of the nation's banks closed their doors.
Many wealthy insiders also did quite well, quietly pulling out
of the stock market just before the crash, then jumping back in
when they could buy up companies for pennies on the dollar. While
small investors were going under and jumping from windows, the
Big Money Boys were accumulating the stocks that had been sold
at distressed prices and the real estate that had been mortgaged
to buy the stocks. The country's wealth was systematically being
transferred from the Great American Middle Class to Big Money.
The Homestead Laws were established in
the days of Abraham Lincoln to encourage settlers to move onto
the land and develop it. The country had been built by these homesteaders,
who staked out their plots of land, farmed them, and defended
them. That was the basis of capitalism and the American dream,
the "level playing field" on which the players all had
a fair start and something to work with. The field was level until
the country was swept by depression, when homes and farms that
had been in the family since the Civil War or the Revolution were
sucked up in a cyclone of debt and delivered into the hands of
the banks and financial elite.
Milton Friedman, professor of economics at the University of Chicago
and winner of a Nobel Prize in economics
The Federal Reserve definitely caused
the Great Depression by contracting the amount of currency in
circulation by one-third from 1929 to 1933.
Louis T. McFadden, Chairman of the House Banking and Currency
[The depression] was not accidental. It
was a carefully contrived occurrence The international bankers
sought to bring about a condition of despair here so that they
might emerge as rulers of its all.
Louis T. McFadden, Chairman of the House Banking and Currency
Committee, in 1934, filed a Petition for Articles of Impeachment
against the Federal Reserve Board, charging fraud, conspiracy,
unlawful conversion and treason. He told Congress:
This evil institution has impoverished
and ruined the people of these United States, has bankrupted itself,
and has practically bankrupted our Government. It has done this
through the defects of the law under which it operates, through
the maladministration of hat law by the Fed and through the corrupt
practices of the moneyed vultures who control it.
A document called "The Bankers Manifesto of 1934, an update
of "The Bankers Manifesto of 1892," was reportedly published
in The Civil Servants Yearbook in January 1934 and in The New
American in February 1934 and was circulated privately among leading
bankers. It read in part:
Capital must protect itself in every way,
through combination [monopoly] and through legislation. Debts
must be collected and loans and mortgages foreclosed as soon as
possible. When through a process of law, the common people have
lost their homes, they will be more tractable and more easily
governed by the strong arm of the law applied by the central power
of wealth, under control of leading financiers. People without
homes will not quarrel with their leaders. This is well known
among our principal men now engaged in forming an imperialism
of capital to govern the world.
From his first months in office, [FDR] implemented tough legislation
against the Wall Street looting and corruption that had brought
down the stock market and the economy. He took aim at the trusts
and monopolies that had returned in force with the laissez-faire
government of the Roaring Twenties. By 1929, about 1,200 mergers
had swallowed up more than 6,000 previously independent companies,
leaving only 200 corporations in control of over half of all American
industry. FDR reversed this trend with new legislation, reviving
the policies initiated by his cousin Teddy. He also imposed strict
regulations on Wall Street. The Glass-Steagall Act was passed,
limiting speculation and preventing banks from gambling with money
entrusted to them. Regular commercial banks were separated from
investment banks dealing with stocks and bonds, in order to prevent
bankers from creating stock offerings and then underwriting or
selling the offerings by hyping the stock. Banks had to choose
to be either commercial banks or investment banks. Commercial
banks were prohibited from underwriting most securities, with
the exception of government-issued bonds, speculative abuses were
regulated through the Securities Act of 1933 and the Securities
Exchange Act of 1934.
... Needless to say, the Wall Street financiers
were not pleased. "They are unanimous in their hatred of
me," Roosevelt said defiantly, "and I welcome their
hatred!" A clique of big financiers and industrialists was
rumored to be so unhappy with the President that they plotted
to assassinate him. Major General Smedley Butler testified before
Congress that he had been solicited by Morgan banking interests
to lead the plot.
He said he was told by a Morgan agent
that Wall Street was about to cut off credit to the New Deal,
and that Roosevelt "has either got to get more money out
of us or he has got to change the method of financing the government,
and we are going to see that lie does not change that method."
Change the method of financing the government
to what? Hemphill had urged the government to issue its own Greenback-style
currency, and Patman had proposed nationalizing the banks. Greenback-style
funding was actually authorized by the Thomas Amendment, which
provided that the President could issue $3 billion in new Greenbacks
if the Federal Reserve Banks failed to fund $3 billion in government
bonds." That authority was never exercised, but the threat
was there. The plot to assassinate Roosevelt failed, but according
to Smedley, it was only because he had refused to lead it.
As for Congressman McFadden's impeachment
action against the Fed, he never got a chance to prove his case.
His investigation was terminated by his sudden death in 1936,
under suspicious circumstances.
... McFadden then died mysteriously of
"heart-failure sudden-death," following a bout of "intestinal
flue." His petition for Articles of Impeachment against the
Federal Reserve Board for fraud, conspiracy, unlawful conversion
and treason was never acted upon.
Representative Wright Patman
Federal Reserve is a total moneymaking
machine. It can issue money or checks. And it never has a problem
of making its checks good because it can obtain the $5 and $10
bills necessary to cover its check simply by asking the Treasury
Department's Bureau of Engraving to print them.
Virtually all money in circulation today can be traced to government
debt that has been "monetized" by the Federal Reserve
and the banking system. This money is then multiplied many times
over in the form of bank loans." In 2006, M3 (the broadest
measure of the money supply) was nearly $10 trillion, and the
Treasury securities held by the Federal Reserve came to about
one-tenth that sum. Thus the money supply has expanded by a factor
of about 10 for every dollar of federal debt monetized by the
Federal Reserve, and all of this monetary expansion consists of
loans on which the banks have been paid interest." It is
this interest, not the interest paid to the Federal Reserve, that
is the real windfall to the banks - this and the fact that the
banks now have a moneymaking machine to back them up whenever
they get in trouble with their "fractional reserve"
lending scheme. The Jekyll Island plan had worked beautifully:
the bankers succeeded in creating a secret source of unlimited
funds that could be tapped into whenever they were caught short-handed.
And to make sure their scheme remained a secret, they concealed
this money machine in obscure Fedspeak that made the whole subject
seem dull and incomprehensible to the uninitiated, and was misleading
even to people who thought they understood it.
Edward Griffin, in his book 'The Creature from Jekyll Island'
[The function of the Federal Reserve]
is to convert debt into money. It's that simple..
Edward Griffin, in his book 'The Creature from Jekyll Island'
[T]he Fed takes all the government bonds
which the public does not buy and writes a check to Congress in
exchange for them .... There is no money to back up this check.
These fiat dollars are created on the spot for that purpose. By
calling these bonds "reserves," the Fed then uses them
as the base for creating additional dollars for every dollar created
for the bonds themselves. The money created for the bonds is spent
by the government, whereas the money created on top of those bonds
is the source of all the bank loans made to the nation's businesses
and individuals. The result of this process is the same as creating
money on a printing press, hut the illusion is based on an accounting
trick rather than a printing trick.
The Fed reports that 95 percent of its profits are now returned
to the U.S. Treasury." But a review of its balance sheet,
which is available on the Internet, shows that it reports as profits
only the interest received from the federal securities it holds
as reserves. No mention is made of the much greater windfall afforded
to the banks that are the Fed's corporate owners, which use the
securities as the "reserves" that get multiplied many
times over in the form of loans. The Federal Reserve maintains
that it is now audited every year by Price Waterhouse and the
Government Accounting Office (GAO), an arm of Congress; but some
functions remain off limits to the GAO, including its transactions
with foreign central banks and its open market operations (the
operations by which it creates money with accounting entities).
Thus the Fed's most important - and most highly suspect - functions
remain beyond public scrutiny.
Hedge funds were originally set up to "hedge the bets"
of investors, insuring against currency or interest rate fluctuations;
but they quickly became instruments for manipulation and control.
Many of the largest hedge funds are run by former bank or investment
bank dealers, who have left with the blessings of their former
employers. The banks' investment money is then placed with the
hedge funds, which can operate in a more unregulated environment
than the banks can themselves. Hedge funds are now often responsible
for over half the daily trading in the equity markets, due to
their huge size and the huge amounts of capital funding them.
That gives them an enormous amount of control over what the markets
will do. In the fall of 2006, 8,282 of the 9,800 hedge funds operating
worldwide were registered in the Cayman Islands, a British Overseas
Territory with a population of 57,000 people. The Cayman Islands
Monetary Authority gives each hedge fund at registration a 100-year
exemption from any taxes, shelters the fund's activity behind
a wall of official secrecy, allows the fund to self-regulate,
and prevents other nations from regulating the funds.
Derivatives are key investment tools of hedge funds. Derivatives
are basically side bets that some underlying investment (a stock,
commodity, market, etc.) will go up or down. They are not really
"investments," because they don't involve the purchase
of an asset. They are outside bets on what the asset will do.
All derivatives are variations on futures trading, and all futures
trading is inherently speculation or gambling. The more familiar
types of derivatives include "puts" (betting the asset
will go down) and "calls" (betting the asset will go
up). Over 90 percent of the derivatives held by banks today, however,
are "over-the-counter" derivatives - investment devices
specially tailored to financial institutions, often having exotic
and complex features, not traded on standard exchanges. They are
not regulated, are hard to trace, and are very hard to understand.
At one time, tough rules regulated speculation of this sort. The
Glass-Steagall Act passed during the New Deal separated commercial
At one time, tough rules regulated speculation of this sort. The
Glass-Steagall Act passed during the New Deal separated commercial
banking from securities trading; and the Commodities Futures Trading
Commission (CFTC) was created in 1974 to regulate commodity futures
and option markets and to protect market participants from price
manipulation, abusive sales practices, and fraud. But again the
speculators have managed to get around the rules. Derivative traders
claim they are not dealing in "securities" or "futures"
because nothing is being traded; and just to make sure, they induced
Congress to empower the head of the CFTC to grant waivers to that
effect, and they set up offshore hedge funds that remained small,
unregistered and unregulated. They also had the Glass-Steagall
Christopher White, in a report to the House Committee on Banking,
Finance and Urban Affairs in 1994
The derivatives market... is the greatest
bubble in history. It dwarfs the Mississippi Bubble in France
and the South Sea Island bubble in England. This bubble, like
a cancer, has penetrated and taken over the entirety of our banking
and credit system; there is no major commercial bank, investment
bank, mutual fund, etc. that is not dependent on derivatives for
its existence. These derivatives suck the life's blood out of
our economy. Our farms, our factories, our nation's infrastructure,
our living standards are being sucked dry to pay off interest
payments, dividend yields as well as other earnings on the bubble.
The Office of the Comptroller of the Currency reported that in
mid-2006, there were close to 9,000 commercial and savings banks
in the United States; yet 97 percent of U.S. bank-held derivatives
were concentrated in the hands of just five banks. Topping the
list were JPMorgan Chase and Citibank, the citadels of the Morgan
and Rockefeller empires.
In 1992, George Soros and his giant hedge fund Quantum Group backed
by Citibank and other powerful institutional speculators, used
derivatives to collapse the currencies of Great Britain and Italy
in a single day. The European Monetary System was taken down with
John Hoefle, banking columnist for the Executive Intelligence
Review (EIR), in 1998
We are on the verge of the biggest financial
blowout in centuries, bigger than the Great Depression, bigger
than the South Sea bubble, bigger than the Tulip bubble. The derivatives
bubble, in which Citicorp, Morgan, and the other big New York
banks are unsalvageably overexposed, is about to pop. The currency
warfare operations of the Fed, George Soros, and Citicorp have
generated billions of dollars in profits, but have destroyed the
financial system in the process.
Giant international banks are now major players in global markets,
not just as lenders but as investors. Banks have a grossly unfair
advantage in this game, because they have access to so much money
that they can influence the outcome of their bets. If you the
individual investor sell a stock short, your modest investment
won't do much to influence the stock's price; but a mega-bank
and its affiliates can short so much stock that the value plunges.
If the bank is one of those lucky institutions considered "too
big to fail," it can rest easy even if its bet does go wrong,
since the FDIC and the taxpayers will bail it out from its folly.
In the case of international loans, the International Monetary
Fund will bail it out(In Sean Corrigan's descriptive prose:
[W]hen financiers and traders get paid
enough to make Croesus kvetch for taking wholly asymmetric risks
with phantom capital - risks underwritten by government institutions
like the Fed and the FDIC ... . - this is not exactly a fair card
For every winner in this game played with
phantom capital, there is a loser; and the biggest losers are
those Third World countries that have been seduced into opening
their financial markets to currency manipulation, allowing them
to be targeted in powerful speculative raids that can and have
destroyed their currencies and their economies. Lincoln's economist
Henry Carey said that the twin weapons used by the British empire
to colonize the world were the "gold standard" and "free
trade." The gold standard has now become the petrodollar
standard, but the game is still basically the same: crack open
foreign markets in the name of "free trade," take down
the local currency, and put the nation's assets on the block at
fire sale prices. The first step in this process is to induce
the country to accept foreign loans and investment. The loan money
gets dissipated but the loans must be repaid. In the poignant
words of Brazilian President Luiz Inacio Lula da Silva
The Third World War has already started
.... The war is tearing down Brazil, Latin America, and practically
all the Third World. Instead of soldiers dying, there are children.
It is a war over the Third World debt, one which has as its main
weapon, interest, a weapon more deadly than the atom bomb, more
shattering than a laser beam.
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