Crime of the Century and the Credit Crisis

As this crisis began in the US financial sector we would be best served by looking at the history of the US Federal Reserve. If money is the root of all evil the US Federal Reserve is the organic garden that cultivates and nourishes every
penny of it. For where else do we find the money tree (make that an entire forest!) that grows legally?

Yes it is the crime of the century, and sprouted roots in Washington DC on December 23 1913 when the Glass-Owen bill was signed into law. The US Federal Reserve Act was previously debated and contained forty points of contention as the fall session neared the Christmas recess. The US Congressmen prepared to leave Washington for the annual Christmas recess, assured that the Conference bill would not be brought up until the following year. Then creators of the bill pulled some political "sleight of hand" on the American public. In a single day, they ironed out all forty of the disputed points of contention in the bill and quickly brought it to a vote. On Monday, December 22, 1913, the bill was passed by the House 282-60 and the Senate 43-23. This meant that the single most important piece of legislation ever passed by the Senate was missing the votes of 27 Senators because it was passed just prior to the Christmas recess. President Wilson, at the urging of Bernard Baruch, signed the bill on December 23, 1913.

A few years later, President Wilson had second thoughts:
“I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated governments in the world–no longer a government of free opinion, no longer a government by conviction and vote of the majority, but a government by the opinion and duress of small groups of dominant men.”

Another critic was Rep. Charles Lindbergh Sr., the most vocal opponent of the bill and a member of the House Banking and Currency Committee, who on the day before the Federal Reserve Act was passed told Congress:

"This is the Aldrich bill in disguise…The worst legislative crime of the ages is perpetrated by this banking bill…The banks have been granted the special privilege of distributing the money, and they charge as much as they wish…This is the strangest, most dangerous advantage ever placed in the hands of a special privilege class by any Government that ever existed. The system is private...There should be no legal tender other than that issued by the government…The People are the Government. Therefore the Government should, as the Constitution provides, regulate the value of money." (Congressional Record, 1913-12-22)




My apologies for the US history lesson. Why is the history of the US Federal Reserve relevant here?

Simply put, the US Federal Reserve was created by the Federal Reserve Act of 1913 as a privately owned and interconnected system of national banks. Reference this court case for details: (Lewis vs. U.S., case #80-5905, 9th Circuit, June 24, 1982.)

It reads in part: "Examining the organization and function of the Federal Reserve Banks and applying the relevant factors, we conclude that the federal reserve are NOT federal instrumentalities . . . but are independent and privately owned and controlled corporations . . . federal reserve banks are listed neither as `wholly owned' government corporations [under 31 U.S.C. Section 846] nor as 'mixed ownership' corporations [under 31 U.S.C. Section 856] .

This becomes more clear when we look at the relationship between where the bailout money is coming from and where is it going. It is no mere coincidence that there is plenty of money to bail out financial institutions like banks but not so much money for automakers. The US Federal Reserve is now in "self-preservation mode" and will loan as much money as it deems necessary back into the US financial system (the same banks that own shares in the US Federal Reserve) at any cost to the US tax payer to rebuild the health and liquidity of the fractional reserve banking sector that currently exists in the US.


Many folks believe (or more correctly, have been led to believe) that the US Federal Reserve is United States Government institution. The Federal Reserve is not a government institution, department, or agency. It is a private credit monopoly which invents money out of thin air and lends it to the US Government through the US Treasury Department (at profit charging interest), for the benefit of these private bankers. It is a collection of 12 private credit monopolies (US Federal Reserve Banking districts ) that was deceitfully foisted upon the United States by the lobby of a powerful banking consortium in 1913. Not Coincidentally, this privately held banking consortium also determines the interest rate at which this money is loaned by determining the interest rates.

The Federal Reserve basically works like this: The government granted the power to create money to the Federal Reserve. They create money, then loan it back to the government charging interest. The government levies income taxes to pay the interest on the debt. On this point, it's interesting to note that the Federal Reserve Act and the sixteenth amendment, which gave Congress the power to collect income taxes, were both passed in 1913. The incredible power of the US Federal Reserve over the economy is universally admitted. Some people, especially in the banking and academic communities, even support it. (US Senator Ron Paul is the most vocal and outspoken critic of the US Federal Reserve.)

Why do we focus on the US Federal Reserve? Simply because that organization which
is not accountable to Congress controls the money supply and the interest rate.
The US Federal Reserve has never been audited its financial statements have never been publicly disclosed.

Notice also that US income tax came into existence in 1913. That income tax was only needed to pay interest to the bankers for the money that they loaned to the US government. Yes, you read that right, the Federal Reserve, mostly on paper and computer, creates money or pays the US Treasury a small printing fee for currency, and then loans this money to the US government. The taxes pay them interest on this loan that cost the Federal Reserve virtually nothing to make. What a sweetheart of a deal they have going for them. To be clear, this amounts to a license to print money, loan it out (at virtually no cost) , and charge interest on it.
This concept forms the basis of all of fractional reserve banking (loan money and charge interest on it). Fractional reserve banking combined with a fiat currency ( printed paper not backed by gold or any precious metal or physical item) is in the opinion of this author the real root of all evil.


Let's look at the collapse of the US investment bank Bears Sterns, and the buyout by J P Morgan Chase and the loan from the US Federal Reserve for a moment.



J P Morgan Chase owns an interest in the US Federal Reserve. They hold shares in it as do other banks like Bank of America, Citigroup, and HSBC. The CEO of J P Morgan (James Dimon) sits on the Board of the New York Federal Reserve. The US Federal Reserve (acting this time in the best interest of "insider" J P Morgan Chase) invented $55 billion out of thin air AND in an unusual (if not questionable or illegal) move lent it directly to J P Morgan it to "save" Bear Sterns in a buy out deal. No one is asking where the $55 billion came from in the first place? The US Federal Reserve grew it on their money trees and lent it directly to J P Morgan. Now let's look closely at who made these decisions. There should be no doubt this represents a conflict of interest of the highest order.

J.P.Morgan's CEO James Dimon

James Dimon of J P Morgan sits on the Board of Directors of the New York Federal Reserve Bank which made the decision to
extend $55 billion of loans to J P Morgan to buy Bear Stearns. Bear Stearns' CEO, Alan Schwartz, was not on the New York Federal Reserve Board. In fact, no one from Bear Stearns is on the Board.

James Dimon was at the luncheon on March 11, 2008 with Ben Bernanke, chairman of the US Federal Reserve,
Tim Geithner, president of the New York Federal Reserve bank, Thain of Merrill Lynch, and Schwarzman of the Blackstone Group and others.

Some claim that the meeting was about Bear Stearns and how to handle that situation. Bernanke, Dimon, and Geithner all testified before the U.S. Senate Committee on Banking April 4, that they first heard of liquidity problems at Bear Stearns on the evening of March 13, 2008. If they were talking about the solution to Bear Stearns at the March 11, 2008 luncheon, then their answers before the Senate Banking Committe were less than truthful.

Perhaps a felony. Alan Schwartz was not invited to the luncheon on March 11, 2008.


What is at issue here is the relationship between the US government and the US financial industry.
A very insightful article in the New York Times by By ANDREW ROSS SORKIN, PETER EDMONSTON
and JENNIFER DANIEL documents the relationship between the nation's bankers, their money their lobbying efforts,
political donations and how politicians make decisions. They write:

"Congress pushed and prodded with rules and regulations, and Wall Street pushed back. But lawmakers also gave tax breaks and eased some rules, allowing the money crowd more room to run. Behind the scenes, financiers sought support on Capitol Hill — usually with a campaign contribution in hand. With sweeping reforms coming, the Wall Street-Washington connection may be more important than ever, and political connections may be the new currency for deal makers."

***link:
http://dealbook.blogs.nytimes.com/2009/03/26/where-wall-street-trades-in-political-currency/?scp=1&sq=contribution&st=cse
(ignore)****

More recently, Paul Volcker, senior economic adviser to President Barack Obama and former chairman of the U.S. Federal Reserve, was quoted at Vanderbilt University in Nashville, Tennessee on April 18th. He said that a review of the Federal Reserve's role, something traditionally regarded as taboo, now seems inevitable given the fallout from the long-running financial crisis. "For better or worse, we are at a point where the Federal Reserve Act is going to be reviewed," said Volcker.


So what does all this actually mean? It simply means that the US Federal Reserve bank now finds itself with the perfect opportunity to make hundreds of billions of dollars of profitable loans for which they are charging the borrower (the US Government, through the US Treasury) a very low rate of interest. One might suggest as a shrewd lender, they don't really want their principal back, they just want to charge interest on the loans in perpetuity. But we must consider this is the same US Federal Reserve that is also legally responsible for setting the rate of interest and it would not be unrealistic to suggest we will see interest rates rise over the next several years as US economy recovers.

Capitalism and avarice drive the US economy in a way many Canadians cannot fully appreciate. Under the Bush administration this level of excessive greed spawned a very aggressive (and perhaps even fraudulent) subprime lending bonanza (loaning money to unworthy borrowers who could not afford to buy expensive real estate) that imploded into an adverse economic feedback loop of falling real estate prices, foreclosures, unemployment, and frozen credit markets. It would appear then the primary benefactor of this credit crisis is none other then the the bank owners and private equity stake holders of the US Federal Reserve as they bask in the once-in-a-generation opportunity to extend as much new debt as possible (also known as bail out loans to financial institutions). By controlling both the interest rate on that new debt, and the US money supply, the US Federal Reserve will surely profit from this crisis in ways that will never be fully understood. In summary the privately owned US Federal Reserve is not accountable to the US Congress or the President and has never been audited, they loan billions of US dollars, (they grow on their mythical forest of evergreen money trees) charge interest on it, and will make untold billions in profits from this period of economic crisis in the US. (If you noticed, the new head of the Treasury, Tim Geithner was an Obama political appointee, but the head of the US Federal Reserve, Ben Bernanke, was not replaced by Obama because the US Federal Reserve Act does not give the President of the United States or the US Congress the power or authority replace him.)