Paper on the Federal Reserve

Inasuma · Feb 4, 2009

So, for my lit analysis class, I read a book called The Creature From Jekyll Island by G. E. Griffin. It has a secondary title that says, "A second look at the Federal Reserve." So you can guess what it is about.

At any rate, I wrote a paper on the first half of the first chapter (it's not a particularly large book, but there is a ton of information), explaining how from past events and actions of the Federal Reserve, shows how it is really a cartel that doesn't really make public-interested opinions, but instead, private-interested decisions. In other words, how it is a consolidation of power.

Feedback would be great. <3

I did read a few other smaller books, not only this one for this, but I only cited Griffin's book as my main source. I also took from other sources which I already knew. Thank Jebus I didn't need a bibliography. <:

A Second Look at the Federal Reserve
In the first century B.C., there was a philosopher known as Epictetus, from Phrygia, and it was he who said, â€œAppearances are of four kinds: things either are as they appear to be; or they neither are nor appear to be; or they are but do not appear to be; or they are not and yet appear to be,â€ and one should look no further for an example of the fourth concept, in todayâ€™s world, than the Federal Reserve System. In Griffinâ€™s The Creature from Jekyll Island, the Federal Reserve has a consolidation of power, cumulatively represented by many events, such as the bankruptcy Penn Central Railroad in 1970, Commonwealth Bank of Detroit in 1972, and the largest of these, New York City in 1975. But before we address these three events, first we need to understand exactly what shapes the reasoning behind how they represent this consolidation of power.

In many ways, the banks hold much power over the government, and likewise, the country. It is expressed constantly that it is an institution owned by the United States government. However, this couldnâ€™t be further from the truth. Before its implementation in 1913, the Federal Reserve concept had been implemented and removed several times by both the people and politicians. Such as Andrew Jackson, who went and shut-down the Central Bank that preceded the Federal Reserve. In fact Jackson's entire political platform, at least, revolved around ending this institution, stating: â€œThe bold efforts the present bank has made to control the government are but premonitions of the fate that awaits the American people should they be deluded into a perpetuation of this institution or the establishment of another like it.â€ Essentially how the central bank works, is you have one major bank; in this case, the Federal Reserve. This Federal Reserve bank loans out money to commercial banks at interest, allowing them to use the money for the basis of more loans to local and community banks, also, at interest. This is a very dangerous notion, because from this very general (and generous) outline of essentially how the money supply is created and expanded, we see that it can never be fully paid back, for the principle (or loaned money) is the only money that existed in the first place. Now, the â€œCentral Bankâ€ simply means one thing: The Federal Reserve is the core of the banks, while the commercial banks simply comprise the rest of the central bank. So, where is the money to pay for the interest? There is none. And that is the whole basis of the Federal Reserve concept. This use of loans and interest is extensively referred to as the "Fractional Reserve" practice. Now, it should be pointed out that it is impossible for every corporation or business to be completely out of debt, for the entire concept of money and money creation is debt and liability. Due to this, the banks have construed several tactics of disguising the disequilibrium that exists between the banks and the borrowers. One of which being the Roll-Over Play, which is if the borrower cannot pay his current loan, he or she must borrow more money from the bank in the form of a loan to cover his or her current loan. Covering a loan with another loan is exactly the point, for it secures the evidence of dependability and keeps the interest pumping, which is the only thing the bank is concerned with in the first place as its main steam of income.

This paradox of debt and ownership is very present in todayâ€™s world business, the first event of which weâ€™re talking about is known as Penn Central Railroad in 1970. Penn Central was the largest railroad service with 96,000 employees and a payroll of $20 million a week. In 1970, it also became the nationâ€™s largest bankruptcy. It is also worth noting that, while it was also in debt to nearly every bank it borrowed from, agents from the largest of the banks it owed were on the board of directors, so in this case, all management issues were in the hands of the banks. On top of that, the bank had control over huge blocks of the companyâ€™s stocks. This was a very convenient arrangement, not the least of which was the fact the bank was managing the company. Because the financial situation was so weak, if they couldnâ€™t get a bail out, they would no doubt be closed down. Before the public was noted of this, however, on May 28th, Chase Manhattan sold 134,000 shares of its Penn Central holdings. And again, before the public was notified, they sold another 128,000 shares. More to the point, most or all of the major management decisions that led to the demise of Penn Central were decided by or with the board of directors. That is, to say, the banks who were giving out loans in the first place. So essentially the banking system was the poor management, and they were the only ones responsible. Furthering this exercise, they managed to sell all of their shares (the great majority, also) before giving out on the Company, letting it fall and stocks crash in the company, with the taxpayer and public as the only victim. The operators of this system know that this is the way it works. And the ideal situation is to create more money out of thin air, re-lend it to companies like Penn Central, Chrysler, and the like, who are in similar straits. The end result without fail is bankruptcy, for it is impossible to pay back the outstanding debt created.

Secondly, as explained, the major banks are the ones that make up the core, while the smaller banks are the ones that comprise the total central bank. And the major banks must be saved at all costs, no matter what. The Federal Reserve is the only thing capable of created money and allowing it out with nothing to be repaid. And that is what they must do for these major commercial banks. Such as Morgan, Chase Manhattan, IMF, and the like. The apparent â€œcrisisâ€ created with them are very real, but also very controlled, and the Commonwealth Bank of Detroit is the only exception to that fact. This next bailout occurred in 1972, with a $1.5 billion bailout for Commonwealth Bank. Commonwealth was a bank that handled most of its loans and phenomenal growth through Chase Manhattan of New York. Broadly speaking, when Commonwealth went under, Chase Manhattan immediately seized 39% of its stocks to save it, and also make an attempt to control and gain the money back in which it had loaned to Commonwealth. This was later quantified by FDIC director Sprague:

Chase officers â€¦ suggested that Commonwealth was a public interest problem that the government agencies should resolve. That unsubtle hint was the way Chase phrased its request for a bailout by the governmentâ€¦. Their proposal would come down to bailing out the shareholders, the largest of which was Chase. (Griffin, pg. 52)

The Majority of the bankers argued that it should not be allowed to plunge, most notably on two accounts: 1) It served many minority neighborhoods and, (2) there were simply not enough banks in the city to absorb its operation without creating an unhealthy concentration of banking power in the hands of the few. This is obvious; because of the fact the major banks must remain dominant, as well as the smaller commercial banks they support. These facts had appeared to be thrown in simply for good measure, to disguise the real intention of the bankers not wanting other competitive banks continuing stable service without their help or by the support of other, more dominant commercial banks out of their reach. So as a result, FDIC gave out a $60 billion bailout in order to make sure it didnâ€™t appear indifferent, and Chase managed to absorb some losses as a result. And later in 1983, what was left of Commonwealth was sold to what is now called Comerica, fulfilling the centralization and overpowers of the bank, with of course Chase covering some losses, being such a major influence. This is why it is so dangerous for banks to be this cozy; they can usurp each other and void actual aid, instead aiming for absorption of profits and financial gain.

Onto our third outlook, while New York City doesnâ€™t necessarily function as a â€œcorporation,â€ it greatly follows the trends of one, particularly regarding debt. In this case, it had reached the end of its credit rope and was struggling to make pay roll. Its frequent habits of welfare (essentially a welfare state in and of itself) and large loans had earned it the place of being so far in debt, the interest it owed was starting to catch up to its original principal liability. This is not to be surprising, for NYC had in its grasps endless varieties of welfare agencies, large payroll disequilibrium (local workers earned more than private corporate or industry workers), not to mention it had additional costs regarding free college educations, subsidized housing and free medical care. We can see from this pattern that city taxes were simply not enough to cover this outstanding debt created. When payment on the interest of NYC halted, bankers rushed to Washington, to Congress, for immediate action, because the largest city in the world at the time could simply not be allowed to go under, for thousands of essential services, jobs, police protection, garage disposal and the like. They continued to say that crime, disease and corruption would run rampant in the city and would be a disgrace to Americaâ€”and to the world, for that matter. David Rockefeller, publically considered a financial luminary, persuaded his friend Helmut Schmidt, Chancellor of West Germany, to spread news that the fall of this City could cause international financial crisis of huge proportions. So, a bill was passed that the Treasury would be allowed to loan up to $2.3 billion to cover the financial crisis, which was more than double its original debt. This was highly ideal for bankers because this meant that now NYCâ€”previously mentioned the largest city in the world at the timeâ€”would be at the hands of economic and political influence by the very bankers who sought to â€œsaveâ€ NYC. Until this would be paid back, which is obviously not likely to happen, NYC became locked in a cell until anything could be paid back. But this didnâ€™t matter to the cityâ€”the public neednâ€™t go under, that would be far too socially impacting everywhere. And since this money was being created by the Federal Reserve, purchasing power by the public and taxpayer would be diminished even further through inflation, but at least the banks could be paid back, which is the object of the game. And even ever since this, NYC has continued to be in debt this way and it is likely it will never be completely out of it. The utopia of NYC will always be under lived due to this large influence of the FED loaning, not to mention NYC must first pay its interest before going anywhere, which is nearly twice the size of the original liability.

In conclusion, The Federal Reserve bank of America could not be any less than a creature of debt and power consolidation, and the events of Penn Central, Commonwealth Bank and New York City deeply justify this perspective. And when we also see that the very foundational method of which the Federal Reserve operates on is inherently corrupt, in that it is constantly needing to inflate the money supply, diminishing purchasing power, it comes as no surprise as to what potentials we live under, for bankruptcy is simply built right into the system we think is â€œfree market economy.â€ It is used to reduce competition through corporations (Wal-Mart, GameStop, Kohlâ€™s, and Chase Manhattan) so that prices can be raised higher than normal due to the scarcity of options available. We are truly the most privatized nation in the world, thanks to the Federal Reserveâ€™s implementation in 1913.
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Thanks. :3

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Paper on the Federal Reserve

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