100 Years Is Enough: Time to Make the Fed a Public Utility

December 23rd, 2013, marks the 100th anniversary of the Federal Reserve, warranting a review of its performance.  Has it achieved the purposes for which it was designed?

The answer depends on whose purposes we are talking about.  For the banks, the Fed has served quite well.  For the laboring masses whose populist movement prompted it, not much has changed in a century.

Thwarting Populist Demands

The Federal Reserve Act was passed in 1913 in response to a wave of bank crises, which had hit on average every six years over a period of 80 years. The resulting economic depressions triggered a populist movement for monetary reform in the 1890s.  Mary Ellen Lease, an early populist leader, said in a fiery speech that could have been written today:

Wall Street owns the country. It is no longer a government of the people, by the people, and for the people, but a government of Wall Street, by Wall Street, and for Wall Street. The great common people of this country are slaves, and monopoly is the master. . . . Money rules . . . .Our laws are the output of a system which clothes rascals in robes and honesty in rags. The parties lie to us and the political speakers mislead us. . . .

We want money, land and transportation. We want the abolition of the National Banks, and we want the power to make loans direct from the government. We want the foreclosure system wiped out.

That was what they wanted, but the Federal Reserve Act that they got was not what the populists had fought for, or what their leader William Jennings Bryan thought he was approving when he voted for it in 1913. In the stirring speech that won him the Democratic presidential nomination in 1896, Bryan insisted:

[We] believe that the right to coin money and issue money is a function of government. . . . Those who are opposed to this proposition tell us that the issue of paper money is a function of the bank and that the government ought to go out of the banking business. I stand with Jefferson . . . and tell them, as he did, that the issue of money is a function of the government and that the banks should go out of the governing business.

He concluded with this famous outcry against the restrictive gold standard:

You shall not press down upon the brow of labor this crown of thorns, you shall not crucify mankind upon a cross of gold.

What Bryan and the populists sought was a national currency issued debt-free and interest-free by the government, on the model of Lincoln’s Greenbacks. What the American people got was a money supply created by private banks as credit (or debt) lent to the government and the people at interest. Although the national money supply would be printed by the U.S. Bureau of Engraving and Printing, it would be issued by the “bankers’ bank,” the Federal Reserve. The Fed is composed of twelve branches, all of which are 100 percent owned by the banks in their districts. Until 1935, these branches could each independently issue paper dollars for the cost of printing them, and could lend them at interest.

1929: The Fed Triggers the Worst Bank Run in History

The new system was supposed to prevent bank runs, but it clearly failed in that endeavor. In 1929, the United States experienced the worst bank run in its history.

The New York Fed had been pouring newly-created money into New York banks, which then lent it to stock speculators. When the New York Fed heard that the Federal Reserve Board of Governors had held an all-night meeting discussing this risky situation, the flood of speculative funding was retracted, precipitating the 1929 stock market crash.

At that time, paper dollars were freely redeemable in gold; but banks were required to keep sufficient gold to cover only 40 percent of their deposits. When panicked bank customers rushed to cash in their dollars, gold reserves shrank. Loans then had to be recalled to maintain the 40 percent requirement, collapsing the money supply.

The result was widespread unemployment and loss of homes and savings, similar to that seen today. In a scathing indictment before Congress in 1934, Representative Louis McFadden blamed the Federal Reserve. He said:

Mr. Chairman, we have in this Country one of the most corrupt institutions the world has ever known. I refer to the Federal Reserve Board and the Federal Reserve Banks . . . .

The depredations and iniquities of the Fed has cost enough money to pay the National debt several times over. . . .

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.

These twelve private credit monopolies were deceitfully and disloyally foisted upon this Country by the bankers who came here from Europe and repaid us our hospitality by undermining our American institutions.

Freed from the Bankers’ “Cross of Gold”

To stop the collapse of the money supply, in 1933 Roosevelt took the dollar off the gold standard within the United States. The gold standard had prevailed since the founding of the country, and the move was highly controversial. Critics viewed it as a crime. But proponents saw it as finally allowing the country to be economically sovereign.

This more benign view was taken by Beardsley Ruml, Chairman of the Federal Reserve Bank of New York, in a presentation before the American Bar Association in 1945. He said the government was now at liberty to spend as needed to meet its budget, drawing on credit issued by its own central bank. It could do this until price inflation indicated a weakened purchasing power of the currency. Then, and only then, would the government need to levy taxes—not to fund the budget but to counteract inflation by contracting the money supply. The principal purpose of taxes, said Ruml, was “the maintenance of a dollar which has stable purchasing power over the years. Sometimes this purpose is stated as ‘the avoidance of inflation.’”

It was a remarkable realization. The government could be funded without taxes, by drawing on credit from its own central bank. Since there was no longer a need for gold to cover the loan, the central bank would not have to borrow. It could just create the money on its books. Only when prices rose across the board, signaling an excess of money in the money supply, would the government need to tax—not to fund the government but simply to keep supply (goods and services) in balance with demand (money).

Ruml’s vision is echoed today in the school of economic thought called Modern Monetary Theory (MMT). But after Roosevelt’s demise, it was not pursued. The U.S. government continued to fund itself with taxes; and when it failed to recover enough to pay its bills, it continued to borrow, putting itself in debt.

The Fed Agrees to Return the Interest

For its first half century, the Federal Reserve continued to pocket the interest on the money it issued and lent to the government. But in the 1960s, Wright Patman, Chairman of the House Banking and Currency Committee, pushed to have the Fed nationalized. To avoid that result, the Fed quietly agreed to rebate its profits to the U.S. Treasury.

In The Strange Case of Richard Milhous Nixon, published in 1973, Congressman Jerry Voorhis wrote of this concession:

It was done, quite obviously, as acknowledgment that the Federal Reserve Banks were acting on the one hand as a national bank of issue, creating the nation’s money, but on the other hand charging the nation interest on its own credit—which no true national bank of issue could conceivably, or with any show of justice, dare to do.

Rebating the interest to the Treasury was clearly a step in the right direction. But the central bank funded very little of the federal debt. Commercial banks held a large chunk of it; and as Voorhis observed, “[w]here the commercial banks are concerned, there is no such repayment of the people’s money.” Commercial banks did not rebate the interest they collected to the government, said Voorhis, although they also “‘buy’ the bonds with newly created demand deposit entries on their books—nothing more.”

Today the proportion of the federal debt held by the Federal Reserve has shot up, due to repeated rounds of “quantitative easing.” But the majority of the debt is still funded privately at interest, and most of the dollars funding it originated as “bank credit” created on the books of private banks.

Time for a New Populist Movement?

The Treasury’s website reports the amount of interest paid on the national debt each year, going back 26 years. At the end of 2013, the total for the previous 26 years came to about $9 trillion on a federal debt of $17.25 trillion. If the government had been borrowing from its own central bank interest-free during that period, the debt would have been reduced by more than half. And that was just the interest for 26 years. The federal debt has been accumulating ever since 1835, when Andrew Jackson paid it off and vetoed the Second U.S. Bank’s renewal; and all that time it has been accruing interest. If the government had been borrowing from its central bank all along, it might have had no federal debt at all today.

In 1977, Congress gave the Fed a dual mandate, not only to maintain the stability of the currency but to promote full employment.  The Fed got the mandate but not the tools, as discussed in my earlier article here.

It may be time for a new populist movement, one that demands that the power to issue money be returned to the government and the people it represents; and that the Federal Reserve be made a public utility, owned by the people and serving them. The firehose of cheap credit lavished on Wall Street needs to be re-directed to Main Street.

__________________________

Ellen Brown is an attorney, president of the Public Banking Institute, and author of twelve books including the bestselling Web of Debt. In The Public Bank Solution, her latest book, she explores successful public banking models historically and globally. Her blog articles are at EllenBrown.com. She is currently running for California State Treasurer on the Green Party ticket.

63 Responses

  1. It is time to create a National Public Owned Cooperative Bank.

    • Yep, much like the bank of North Dakota with it’s legally binding mission statement to return all profits to the people of the state as new loans or tax refunds !…they just can’t create the new money as the NEW fed will, if we can get it through congress !

  2. If anyone thinks that the people who own the FED, and the other major Central Banks, all the way up to the BIS in Switzerland, are going to easily relinquish the Power, you’re all in for a rude shock.
    These people run the World, and all the political parties, politicians, left and right etc, are just window dressing clowns(particularly “the most powerful man in the world”,the POTUS)
    “He who has the gold, makes the rules”

    • Gold is Old ! ALL commodities should back money, like the GNP and asset base of a country to more adequately reflect the nation’s true worth in it’s currency IMO. A no-debt, US dollar…sovereign money, like Ben Franklin’s two attempts that established and saved the new country, Abe Lincoln’s, FDR almost had sovereign money, but JFK did infact, but silver backed…ok for a start, til the public understands better.

    • You’re right not to expect this to happen if we attempt top down solutions that depend upon banker owned politicians to implement these changes.

      But we can pull the rug from under this banker occupation by starting up public banks locally in cities and states throughout the nation. Once enough public institutions take root, the FED cartel will wither and die. Nationalizing will be an easy and natural step at this point.

    • Corporations dependent on the government, and media who large debt is owned to the banks. It is almost an impossible task to educate then to motivate the people to change this debt based bank issued money system.

      • Almost …. so don’t educate them. Let fear and/or greed be the motivator for action. That’s why God invented precious metals.

      • The sad truth is that the United States is not a Soverign -Republic Government. It is a CORPORATION that incorporated itself under the Federal Act OF 1871 in which as stated in Article 15 of that law it became the USA INCORPORATED ! This was done in order for the USA INCORPORATED to Borrow BILLIONS OF DOLLARS from 1876-1880 from the Rothchild Bank of LONDON ! SIMPLY look up the Rothchild’s Bank of London loan records online during the above time period. Our Country is nothing more than a CORPORATIONAL COLONY owned by Zionist Bankers that is used as their pit bull attack dog when needed ! When the southern states lost the civil war that was the END of the REPUBLIC Known as the UNITED STATES OF America that ended under the Federal Act of 1871.

    • The CIA controls the Fed.

      • Do you have a cite for that claim?

      • It wouldn’t surprise me if the people who run the CIA aren’t the same people who run the FED, and therefore America. I don’t think the CIA issue a comprehensive report each year of their many and varied activities though, so, who knows what they are up to their necks in?
        It’s not known as the “Cocain Import Agency” without good reason.
        By the way, WHO is the CIA responsible to, and who ‘audits’ their activities?

      • According to the Organic Act of 1871 the UNITED STATES is a corporation chartered to the Crown, e.g., City of London.

        I believe that the Fed is also owned by the City of London.

        • “The City” as a square mile of London is known as, is actually called “The Corporation of the City of London”. When the Queen(or King, if there is one at the time) have to get permission the entre that part of London(permission is routinely given). It is also a Tax Haven.
          According to a Google search, The FED is owned by British, European and American mega Banks:
          Roschilds Banks of London and Berlin
          Goldman Sachs Bank of New York
          Kuhn Loeb Bank of New York/Shearson American Express.
          Lazard Brothers Bank of Paris
          Israel Moses Banks of Italy
          Warburg Bank of Hamburg, Germany and Amsterdam
          Chase Manhattan Bank of NY (D Rockerfeller)
          I’m not sure but these Banks may be part of the set up of the Corporation of the City of London.

  3. […] Ellen Brown Web of Debt […]

  4. I just posted, but it hasn’t shown. Are you screening, or is WordPress screwed up?

    “This quote is far better: He who has the lead may enforce the law. We must work for the immediate arrests and indefinite detentions of the psychopaths in the monetary crime syndicates who have been waging warfare against humanity for centuries. Their assets must be forfeited and their punishments must be proportional to their orchestrated mass murders. This is a law enforcement issue, not a monetary one. Its past time for us to crawl out of the tar pit of stupidity and advance civilization.”

    Ernest Huber

    • Hitler tried it in ’39-’45, and he failed.

      • German Chancellor Adolf Hitler was up against the Money Power which initially financed him.

        • Yes, but after surviving the Versailles treaty and actually prospering in the face of it, he ruined it all by manufacturing mainly war materiel, but Germany set the example of how tough a work ethic based people can be… and at least they tried to do away with him …how often is that seen in history ?

    • Are not the money and enforcement powers ultimately one and the same?

      • Yes. The latter is on the payroll of the former.

    • Yes sir ! The biggest crime against all of western civilization ever contrived…John Law and all that…debt money. BUT, we must “protect and defend” those who unknowingly have been “fenced” by the fed system, so that valid work ethic entities can pay out as planned, ie. retirements, 401Ks, etc.

  5. The People need a broad-based multi-front political revolution preceded or accompanied by a cultural renaissance, a social realignment and an economic reconstruction. A new money and a new sovereignty are two key focal points.

    Ex-Congressman Dennis Kucinich’s bill, NEED Act of 2011, H.R. 2990, can serve as starting point for monetary reform discussions. See https://en.wikipedia.org/wiki/NEED_Act and http://www.opencongress.org/bill/112-h2990/show.

    • Yabut, he wants to pay off the old national debt, regardless of how the money was earned or created…WRONG ; All printing, esp. the QE type needs to be ‘disallowed’ in the new sovereign state of America !

    • Centralized or decentralized ?

      • Somewhat decentralized monetary policies and institutions of government, overseen by the states with their powers of nullification/10th amendment, and other private and public watch dog entities with little to no vested interest, as should be the case in so many other government programs IMO

  6. There is a new populist movement that espouses nationalizing the Fed: the UNITED FRONT AGAINST AUSTERITY http://againstausterity.org/

    Complementing this activist movement is a new political party with the same ideals TAX WALLSTREET PARTY http://www.taxwallstreetparty.org/

  7. […] Ellen Brown Writer, Dandelion Salad The Web of Debt Blog December 22, […]

  8. […] Web of Debt – by Ellen Brown […]

  9. “The real searcher after truth
    will not receive the old because it is old,
    or reject the new because it is new.
    He will not believe men because they are dead,
    or contradict them because they are alive.
    With him an utterance is worth the truth, the reason it contains,
    without the slightest regard to the author.
    He may have been a king or serf — a philosopher or servant, –
    but the utterance neither gains nor loses in truth or reason.
    Its value is absolutely independent of the fame or station
    of the man who gave it to the world.”
    – Robert G. Ingersoll
    (1833-1899) American political leader, orator

  10. […] READ MORE HERE […]

  11. I think the real evil is being missed here, Legal Tender Laws. Nobody should be forced to accept anything for a value they do not agree to.

    What would nationalization really accomplish? would it reign in irresponsible spending? would it end military adventurism? NO!! Ending the Fed would be a great day for Americans, but replacing it with another worthless currency whose only restraint is in the hands of congress is a recipe for disaster.

    Money should be a representation of effort and production. Printing currency is nothing short of stealing! Someone is buying something of value for the cost of printing.

    • Yes, if issuance of the currency is in the hands of an occupied, bought off, corrupt Congress, of course it won’t work. There is no substitute for decent, honest government that serves the people instead of the crooks. For examples of successful economies with government issued currency and public banks, see Ellen Brown’s The Public Banking Solution. There is no theft involved in a correctly publicly issued currency; it is the only way to go. The present system of having private banks, including the private Fed, produce the money supply is theft.

    • there must be legal tender law, lest people pay their taxes in the least acceptable money available, and the government would have trouble trying to unload it to pay it’s bills and to “protect and defend” us..simple.

  12. […] cause ever-increasing and unpayable debt, unemployment, inflation, and high interest rates. Ellen Brown is right: it’s time to transform the Fed into a public utility. This shift from the Fed being a […]

  13. You failed to mention how Jennings Bryan pushed for Bimetallism. He pursued a monetary policy of free silver coinage. That is what the speech was all about

    • Metals are only one type of GNP item; why not ALL GNP items, and include some state assets as well, like houses, which are now plentiful in supply due to foreclosures and non-payment of taxes ? This type of backing for the new no-debt US dollar would certainly be more “valuable” to we the people.

      • Why not, a monetary system that is backed by the “good faith and credit” of the Sovereignty?
        Why not , a Sovereign Nation having a Central Bank that includes in its duties ‘storage of the sovereign unit of exchange (US: $)?.
        Why not, have as an asset base (capitalization) of all the present goods and services? (US at todays ‘mark to market’ could be reasonable set at $900 trillion).
        This is the WEALTH of that nation and belongs to the individuals of that sovereign nation. It is there for storage and must be returned to them upon demand at anytime for “exchange into ANYTHING (goods and service).
        “Money now is the NOTHING you get for SOMETHING before you can get ANYTHING” , Frederick Soddy (“The Role Of Money”).
        The duty of the Central Bank is “for,of, by the people”; to validated their transaction and to be the legal guardian of their wealth.
        Read more: click on “Justaluckyfool”

  14. […] on December 22, 2013 Source: WebofDebtBlog **I note from Ellen’s bio (below) that she is currently running for California State […]

    • I’d support any run that she made wholeheartedly; she means to do the best for our country, which is in so much trouble esp. since and including Reagan…who got rid of the ussr ….for he and his super-rich friends, not “we the people”…I’m still waiting for my “peace dividend” , like all the CEOs got (but not that big) when he got rid of limits of their pay and bonuses, then ran up the biggest deficits in history, billed us.

      • The answers will not come from the political model, IMO. They will comes from the economic model and the reforming of structure for the sake of power redistribution. The political model will follow the economic model. Structure is the guiding principle by which power flows. We each have more power in the economic model than we do in the political. I would urge all people to focus energy where it has the most effect. Another front doesn’t hurt mind you.

        • And the economic model is enforced by guns: the IRS, cops, U.S. military attack and occupation, guns to politicians heads (they get taken out i need be.)

          • Are they telling what to buy now , Ernie ? I would have thought you can vote with your dollars ?

            • Yes, votes are bought with dollars, but the whole system, as Cathryn Fitts says (and Mao said), rests on force.

  15. […] 100 Years Is Enough – Time to Make the Fed a Public Utility – Ellen Brown […]

  16. Excellent work, Ellen; thank you!

    Here’s my contribution to spread the word, that includes your article: http://www.washingtonsblog.com/2013/12/federal-reserve-system-causes-unpayable-debt-unemployment-inflation-high-interest-rates.html

  17. December 23, 2013: banksters celebrate 100 years of absolute sovereignty!

    http://tiny.cc/c5jk8w

    • We have only had monetary soveriegnty a few times in our entire country’s existence; Ben Franklin’s Continental, which allowed the revolution to culminate in our own country ! …and before that, his colonial scrip that was THE cause of the Brits waging war on us, as no mere colony was to be sovereign in any way, esp. monetarily…sadly Hamailton ruined it right away with his bank of NY, “started with borrowed gold, the only way to start a bank” nonsense…that’s for NON- sovereigns. Sovereign money of a sovereign nation must be printed without regard for anything that the nation does not wish it to be

  18. […] Guest post by Ellen Brown. […]

  19. […] cause ever-increasing and unpayable debt, unemployment, inflation, and high interest rates. Ellen Brown is right: it’s time to transform the Fed into a public utility. This shift from the Fed being a […]

  20. […] WebOfDebt  December 22 2013 […]

  21. Excellent, and TIMELY article, by Ellen Brown.

    Happy Holidays, everyone! And may REASON, and COMMON SENSE ultimately prevail !!!

  22. […] Posted on December 22, 2013 by Ellen Brown […]

  23. […] http://www.ellenbrown.com […]

  24. […] The Very Private N.Y. Fed. On the misuse of the N.Y.Fed for class war fraud, see Ellen Brown. […]

  25. […] ​And see people’s economist Ellen Brown’s new post on making the FED a public utility. […]

  26. Most of the “Larry Lunch Buckets” and “Wal Mart Queens” are more concerned about Duck Dynasty and haven’t a clue how their money ends up in their front pockets. Keep the beer cold and the junk flowing in from China. Man, that’s living.

  27. A little-known episode in FED history is that FDR’s 1933 gold confiscation was actually a bailout of the Federal Reserve Bank.

    I did research on the total face value of gold-obligation notes issued by the US Treasury and the Federal Reserve.

    In 1933, the United States held about 6,000 metric tons of gold reserves. The quantity of outstanding US Treasury Gold Certificates as of 1933 was the equivalent of 16,000 metric tons of gold. That was bad enough, but the big problem was the pre-1934 Federal Reserve Notes (which said “redeemable in gold on demand” on them). The quantity of gold-obligation Federal Reserve Notes outstanding in 1933 was the equivalent of about 56,000 metric tons of gold.

    In other words, there was an 11:1 leverage on the country’s gold reserves, and most of that leverage was put on by the Federal Reserve, which had no legal title to the gold.

    The complete article is available here:

    http://www.moonlightmint.com/bailout.htm

    • The government went into receivership to the privately owned Federal reserve. The bankers demanded payment in gold. FDR confiscated the gold and left the country in possession of the FED. FED notes are the private property of the FED and whatever you purchase with them actually belongs to the FED. That is why your property and possesions can be taxed. You can’t have an allodial title to anything purchased with Federal reserve notes.

      • Does allodial title even exist in the U.S.? How could it be known what was used to purchase something anyway? What would be the alternative to FRNs–bitcoin? “Title” would just pertain to real estate, cars and the like anyway, no?

        • I believe if you can purchase something with gold or silver coins minted prior to certain date you can actually own it outright. I don’t remember the cutoff date, but it’s probably something you can research.

          I don’t believe a truly different currency outside FRNs would be permitted. Such people would be prosecuted for counterfeiting. Bernard von Nothaus was busted by the Feds for minting silver with Ron Paul’s mug on them. The CIA was involved with Bitcoin from its inception through in-Q-tell. Bitcoin is neither untraceable or independent as a result. Public banks get around this by using FRNs but just not charging interest.

          As collective debtors to the Fed, anything we purchase is done so with the permission of our creditor (FED). In effect there is a lien on everything we purchase. In fact, we are ourselves collateral on the debt which why our income can be taxed. There are UPC codes on our birth certificates denoting which represent our productive capacity which is borrowed against and traded on wallstreet.

    • In a round about and confusing way, all that was really revealed in that research, Daniel, is that gold was under priced. That’s all. This is why the price of gold, as measured in USD’s, had to be set free to float at some point in the future. Better yet, it became a function of the market so we all get a kick at the can , by choice.

  28. Think about all the human potential that is being and has been wasted by restricting the power that money unlocks to a very few of the populace?

    All that creative talent obliterated by being forced to work for a living supporting someone else dreams while your own dreams are lost in the grind of life. All the incredible mental power focused only to make one small group richer every year. No wonder we are no longer progressing as a species. No longer discovering the universe. No longer doing anything of true value.

  29. […] WEB OF DEBT ELLEN BROWN […]

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