December 23, 1913: The Federal Reserve Act Is Signed into Law

“Whoever controls the volume of money in any country is absolute master of all industry and commerce.”—US President James A. Garfield, assassinated just 100 days into his presidency

“The [Federal Reserve] Banks are listed neither as ‘wholly owned’ government corporations . . . nor as ‘mixed ownership’ corporations. . . . Additionally, Reserve Banks, as privately-owned entities, receive no appropriated funds from Congress. . . . Finally, the Banks are empowered to sue and be sued in their own name. . . . They carry their own liability insurance and typically process and handle their own claims. In the past, the Banks have defended against tort claims directly, through private counsel, not government attorneys. . . . For these reasons we hold that the Reserve Banks are not federal agencies. . . .”

—Lewis vs. United States, 680 F. 2d 1239 9th Circuit 1982

Newspaper clipping USA, Woodrow Wilson signs creation of the Federal Reserve, December 24, 1913.

It took more than a century, but at 6 p.m. on December 23, 1913, America’s central banking system, The Federal Reserve Act, was signed into law by President Woodrow Wilson. The American economy and its currency were now totally controlled by “the Fed,” which had the means to fluctuate inflationary or deflationary conditions at their whim via interest rates, by placing money into circulation by selling interest-bearing notes (known recently as “quantitative easing”), and introducing the American banking system to fractional reserve banking which artificially increases the money supply.

Though there were a few periods of federal taxation prior to the Federal Reserve System, American citizens generally paid zero taxes. Federal and state expenses were paid for primarily through tariffs. But the US government would need income to pay the interest owed to pay its creditors, thanks to the huge national debt soon to be incurred due to Federal Reserve monetary policies. In addition, social services such as welfare, unemployment, and food stamps—primarily caused by the economic conditions precipitated by the Federal Reserve inflationary and deflationary tactics—had to be paid for as well. So, just a few months prior to the passing of the Federal Reserve Act, Congress passed the Sixteenth Amendment to the US Constitution, now making it legal to collect federal income tax from American citizens.

The Fed runs America’s economy and currency—simple as that. Economic growth and stock market decreases generally occur when the Fed increases interest rates. When they deflate money and credit, the economy retracts and slows, and stock market “corrections” occur. American jobs, a family’s spending ability, and retirement savings are all totally controlled by a private corporation having absolutely no allegiance to the country, with not one sitting president or member of Congress ever witnessing a Federal Reserve meeting to hear how the country’s economic policy is being decided, or to lend its input as the people’s representatives.

Every American taxpayer, including their president and congressmen, should ask why the Federal Reserve was not constructed as a government agency and manned by government employees, who could be held accountable to our legislators and president. This is tantamount to having Air Force One owned and operated by an airplane manufacturer such as Boeing instead of the United States Air Force. If the Fed was in fact established, as was claimed, to prevent another bank panic like the one in 1907, how did the stock market crash and eventual Great Depression occur less than two decades later, with presumably the greatest financial minds in charge of America’s economy and currency?

The official story is that the Federal Reserve was mandated by Congress to “provide for the establishment of Federal reserve banks, to furnish an elastic currency, to afford means of rediscounting commercial paper, to establish a more effective supervision of banking in the United States, and for other purposes. This will ensure that the American economy remains stable and healthy.” [Italics inserted by S. H. to add emphasis.] But that’s the furthest thing from the truth. The common nickname for the Federal Reserve Bank may be “the Fed” but it should be “the Priv.” Although the chairman of the Federal Reserve is appointed to a four-year term by the president with the support and guidance of the Senate, and the chairman reports on the state of the economy to Congress once a year, the Federal Reserve is a totally private banking system making its own monetary decisions and is not accountable to any branch of the United States government. The Federal Reserve is a private corporation and, unlike every other government agency, has no subservience to the federal government. The word “federal” was simply placed in its name to give it the appearance of a federal agency. This private corporation is not publicly traded, so no statistics or details of employee ownership are made public.

• Property owned by the Federal Reserve is subject to local property taxes. Government buildings are not taxed.

• The Federal Reserve’s salaried employees are not government civil service employees, and they have their own retirement plan.

• All meetings of the Federal Reserve are held in complete secrecy.

• There have never been any minutes reported to Congress or the public, only a summary of the proceedings, usually issued a few weeks following the meeting.

The United States Constitution clearly states that only Congress can coin money, but even though an amendment is the only legal way to alter the Constitution, the Federal Reserve Act took that power away from Congress. Or, rather, Congress illegally relinquished the power to another entity. In his March 4, 1837, farewell address, President Andrew Jackson emphasized what he felt was the potential evil inherent in the paper money system of the Central Bank:

The immense capital and peculiar privileges bestowed upon it enabled it to exercise despotic sway over the other banks in every part of the country. From its superior strength . . . it openly claimed for itself the power of regulating the currency throughout the United States. In other words, it asserted (and it undoubtedly possessed) the power to make money plenty or scarce, at its pleasure, at any time, and in any quarter of the Union, by controlling the issues of other banks and permitting an expansion or compelling a general contraction of the circulating medium according to its own will . . . and this organized money power, from its secret conclave, would have directed the choice of your highest officers and compelled you to make peace or war as best suited their own wishes. The forms of your government might, for a time, have remained; but its living spirit would have departed from it. . . .⁸⁷ [Italics inserted by S. H. to add emphasis.]

With the national debt projected to be $23 trillion in 2020,⁸⁸ Americans have paid almost $11 trillion in interest since 1988.⁸⁹ How do the money interests make billions from America’s money through the Federal Reserve System, at the full expense of each American, while keeping the country in perpetual debt?

• Article 1, Section 8, Clause 5 of the United States Constitution states that only Congress can coin money and regulate the value of that money, yet the Fed creates it out of thin air. In reality, the United States Congress illegally passed an act of Congress, and it has never been challenged in the Supreme Court.

• If the Fed wishes to increase the money supply, it simply buys securities from security dealers, paying those dealers electronically, with no actual money changing hands. The Fed electronically creates US currency. The money is deposited in the banks of the dealers, increasing the money supply, exactly what the Fed did immediately after the 2008 financial crisis with their quantitative easing method. In QE4 (the fourth phase) for instance, every month the bank purchased $85 billion worth of Treasury bonds from their member banks, in effect, coining $85 billion into circulation. Again, constitutionally, only Congress has that power.

• When the Fed wants to fund the government, it takes money out of circulation by selling Treasury bonds to dealers who auction them off.

• All of these transactions increase or decrease a bank’s reserves, and when a bank increases its reserves, it can loan more money due to fractional reserve banking.

• The Federal Reserve, at its whim, creates and destroys America’s currency.

FRACTIONAL RESERVE BANKING

In the United States, due to the Federal Reserve, only a fraction of a bank’s assets are backed by cash deposits. Whatever the Fed determines to be the reserve, usually around 10 percent, is the amount of money that the bank must keep in reserve. If a bank customer deposits $1,000 in their account, the bank keeps $100 “in reserve” and $900 becomes available for the bank to loan to other people. And so on . . . and on—thousands of dollars are created from one $1,000 deposit. Therefore, member banks of the Federal Reserve also create money, again in direct violation of the United States Constitution.

And it gets even weirder if one peruses the Federal Reserve Bank of Chicago’s 1982 publication Modern Money Mechanics: A Workbook on Bank Reserves and Deposit Expansion. If a bank loans $10,000 it deposits that amount in the recipient’s account, but the bank is required to retain only $1,000 of that deposit. The remaining $9,000 excess reserve can be loaned or invested. The book states:

Of course, they [banks] do not really pay out loans from the money they receive as deposits. If they did this, no additional money would be created. What they do when they make loans is to accept promissory notes in exchange for credits to the borrowers’ transaction accounts. Loans (assets) and deposits (liabilities) both rise by $9,000. Reserves are unchanged by the loan transactions. But the deposit credits constitute new additions to the total deposits of the banking system.⁹⁰

So, when you take out a loan for $20,000, if the reserve percentage is 10 percent, the bank is enabled to loan out $18,000—in cash! The bank created $18,000 in cash, loaned out that money (minus the reserve), and will receive interest on both loans, all as profit; all as worthless money except to the profits of the banking powers.

All money is created out of nothing, yet without money all trade ends, except for bartering. When you remove money or reduce the supply, the results are catastrophic. Witness the despair of the Great Depression. The exact same infrastructure that existed during the prosperous 1920s was in existence in the 1930s. The same workforce was available, our fertile farmland, our highly efficient transportation system, and a massive communications network were all there. Americans lacked only one item after the Crash of 1929—an adequate supply of money. And because of this, banks refused to make personal and commercial loans, but conversely, all existing debts from pre-Depression loans were due to the banks. People and companies did not have the money to pay those debts, and the banks repossessed homes and businesses, which the banks now owned. Since Congress gave away its power to create currency to the bankers in the Federal Reserve Act, the banks were America’s only source of money and credit.

This was America’s depression, all caused by a shortage of money, and it could have been cured immediately by the creation of money— the same money being thrown out by the Federal Reserve after the 2008 fiscal crisis (around $85 billion each month, over a trillion each year, in quantitative easing). Instead, the Federal Reserve “foreclosed” on the middle and lower classes after the stock market crash of 1929!

Post–World War II prosperity only came about because there was now an adequate supply of money. A lack of money created the Depression; an abundant supply ended it. This is how bankers use the Federal Reserve System; this is what they had been fighting for all through the 1800s and finally won in 1913; this is almost assuredly why there was an attempt on President Jackson’s life, and this is one of the reasons both Presidents Lincoln and Garfield were assassinated.

During the 1920s and 2000s, thirteen of the world’s greatest economic and monetary minds—the Fed chairman and his twelve board members—secretly met eight times a year. How did these brilliant monetary strategists not anticipate the Crash of 1929 and the 2008 fiscal crisis? How did these monetary geniuses who control the financial infrastructure of the country, who control the nation’s inflationary and recessionary trends and the ups and downs of the stock market (virtually by their own policies) not see a collapse coming?

Imagine you are Eugene Meyer, chairman of the 1930 Federal Reserve. You see your country devastated by the Great Depression. Corporations fail. One out of every four able-bodied workers is unemployed, unable to feed and clothe their families, and some become homeless. There are starving people on soup lines and great food shortages. Misery is everywhere. As your duty calls, would you not report to the president and Congress that a war must be declared— not one against Germany, or Korea, or Vietnam—but a war against the Great Depression? You would tell them that since a shortage of money started this horror, let’s now make it abundant. All that Presidents Hoover and Roosevelt and Eugene Meyer had to do was instruct the Federal Reserve to begin a quantitative easing of buying Treasuries, to institute social programs and construction projects to build up the urban infrastructure and add farming incentives and corporate tax incentives for renewed production and hiring, among other options. True, issuance of Treasuries didn’t begin until 1929, so there may not have been enough in circulation to accomplish all financial goals. They found a way, though, to finance World War I, so those great financial minds in the Federal Reserve could have found a way to finance the war against the Great Depression.

As you probably already know, when the average American family takes out a thirty-year mortgage on a $250,000 home, they will pay back roughly $1million dollars (about three-quarters of a million in interest plus the principal.) But if they sell, which many do, whether two or ten years later, they will have paid mostly interest, with very little principal. They then usually purchase a more expensive home, and the cycle begins again. American homeowners pay interest on their mortgage loans based on a thirty-year loan, yet many have that loan for only a relatively brief period. Why don’t they receive interest rebates when they sell their home after five years based on a five-year loan?

What’s even worse is that the Federal Reserve controls the housing market. When they decrease interest rates, it’s a boon; and at their whim, they increase the rates high enough to cause the market to drop. And since homes are the backbone of the average American family, just a handful of people control the lives of the average American.

History tells us of debt-free and interest-free money issued by governments. The American colonies did it in the 1700s, and their wealth soon rivaled England’s and brought restrictions from Parliament, which led to the Revolutionary War. Abraham Lincoln did it in 1863 to help finance the Civil War and was later assassinated. Germany issued debt-free and interest-free money from 1935, helping to account for its startling rise from the depression to a world power so quickly:

Hitler and the National Socialists, who came to power in 1933, thwarted the international banking cartel by issuing their own money. In this they took their cue from Abraham Lincoln, who funded the American Civil War with government-issued paper money called Greenbacks. . . .

Within two years, the unemployment problem had been solved and the country was back on its feet. It had a solid, stable currency, no debt, and no inflation, at a time when millions of people in the United States and other Western countries were still out of work and living on welfare.⁹¹