Government Corruption Starts with the Federal Reserve!
by Victor Sperandeo with the Curmudgeon
Disclaimer: The views and opinions expressed herein are those of Victor Sperandeo.
Wherever you look within the US government you almost always see corruption. The problem is amplified because virtually nothing is reported in the mainstream media/ press about the reality of government and business. The press, whose main job is to report the real news and monitor corruption in government and business, is now itself part of the corruption! The biggest and most prominent example is the Federal Reserve, which is a "Private Corporation" owned by unknown/secret entities and commercial banks.
Truth About the Fed:
We've covered the Fed extensively in several relevant Curmudgeon posts. Is the Fed a No Risk Hedge Fund or a Ponzi Scheme? criticized the Fed's lack of transparency. Another Curmudgeon post suggested that the Fed had engaged in surreptitious market manipulation which had been ignored by the mainstream media.
Let's now examine Fed ownership via quotes from the Fed's web site in an article titled: Who owns the Federal Reserve?
“The Federal Reserve System fulfills its public mission as an independent entity within government. It is not "owned" by anyone and is not a private, profit-making institution."
Yet that statement is then contradicted in the same article (emphasis added)!!!
“The 12 regional Federal Reserve Banks, which were established by the Congress as the operating arms of the nation's central banking system, are organized similarly to private corporations (see below references) -- possibly leading to some confusion about "ownership." For example, the Reserve Banks issue shares of stock to member banks. However, owning Reserve Bank stock is quite different from owning stock in a private company. The Reserve Banks are not operated for profit, and ownership of a certain amount of stock is, by law, a condition of membership in the System. The stock may not be sold, traded, or pledged as security for a loan; dividends are, by law, 6 percent per year.
Also from the Fed's website- several eye openers which reveal the truth:
Under the Federal Reserve Act, each of the twelve Reserve Banks is separately incorporated with its own board of directors. In each Reserve District, commercial banks that are members of the Federal Reserve System own the stock of their District's Reserve Bank and elect the majority of the Reserve Bank's board of directors; the remainder of the directors are appointed by the Federal Reserve Board.
The Federal Reserve Act provides that the president of a Federal Reserve Bank (each of the 12) shall be the chief executive officer of the Bank, appointed by the board of directors of the Bank, with the approval of the Board of Governors of the Federal Reserve System, for a term of five years.
Hence, the Presidents of the 12 Federal Reserve banks
(which own the Fed) are appointed by their Board of Directors, which are
representatives of PRIVATE commercial banks in their respective district.
1. Lewis vs. United States, 680 F. 2d 1239 9th Circuit 1982
"The regional Federal Reserve banks are not government agencies…but are independent, privately owned and locally controlled corporations.”
“The only “ownership” of the Fed is in shares of each
of the 12 regional banks which are entirely owned by the private member
banks within their respective districts, according to a formula based on their
size (they must subscribe to the shares with 3% of their capital plus
surplus). The ownership is highly
restricted in that such ownership is mandatory; the shares can’t be sold; and they
pay a guaranteed 6% annual dividend.”
Moreover, "The Federal Reserve Act of 1913" states:
“What eventually emerged was the Federal Reserve Act,
also known at the time as the Currency Bill, or the Owen-Glass Act. The bill
called for a system of eight to twelve mostly autonomous regional Reserve Banks
that would be owned by commercial banks…The Federal Reserve System would then
become-- a privately owned banking system that was operated in the public
The essence of this arrangement is that of an independent banking cartel, licensed by an act of Congress, to print Federal Reserve Notes (aka paper money or US dollars), control this nation's money supply, establish member bank reserve requirements, create fiat money including checks written by the Fed, and to set short term interest rates (e.g. Fed Funds and Discount rates).
This SUPPOSEDLY is in the public interest, via an implicit form of altruism and for a 6% dividend received by Reserve Bank stockholders. The Federal Reserve Act was constructed in secret by bankers and major Wall Street firms (representing the Rockefeller's, Morgan's, and Rothschild's) through well-known representatives on Jekyll Island.
The above factual information is rarely written about by the mainstream media and is generally hidden from the public. Why doesn't the press state that the Fed is in reality a separate, private company and explain how it's structured?
Recently, Congress voted down an audit of the Fed. Why? It is completely secret and not at all transparent in what it does, except for releasing the minutes of each FOMC meeting. This is the essence of "Corruption," in my opinion. As Henry Ford observed at the time: "It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning."
Questions Never Asked:
1. Why does the government not print the money itself, instead of paying a third party (the Fed) to print money, and pay both a fee and interest to buy government debt? Some might say that would create inflation!
Using the official government CPI numbers from 1913 (when the Fed was created) to February 2016, the compounded increase in the CPI (indexed) went from 10 to 237.111 or a 3.15% compounded annual rate of increase. This equals an increase in inflation of 2,377.83%. Put another way, $100.00 turned into 4.21 cents of purchasing power over those 103 years. Yet from 1789 to 1913 (124 years before the Fed was created) inflation increased by a total of only 15% under the Gold Standard.
We also got a STATED $19.2 trillion in government debt and about $10 trillion in off balance sheet debt under the FED. The huge increase in debt stems from the belief that it never matters since the Fed can print money to buy it (that used to be called “monetizing the debt” which “bond market vigilantes” wouldn't let happen).
The vigorish (an excessive rate of interest on a loan, typically one from an illegal moneylender) goes to the holders of the debt, which are mainly the banks and foreign governments.
2. Does the US government have to use an (unconstitutional) Federal Reserve Act to accomplish its goals?
In fact, the government is authorized to print money for any reason according to the Supreme Court case "Juilliard v. Greenman," 110 U.S. 421(1884). That was a Supreme Court of the United States case submitted January 22, 1884 and decided March 3, 1884, in which issuance of greenbacks as legal tender was challenged in peacetime. The Legal Tender Acts of 1862 and 1863 were upheld. In an 8–1 decision, resting largely on prior court cases, the power "of making the notes of the United States a legal tender in payment of private debts" was interpreted as "included in the power to borrow money and to provide a national currency."
Note: It's also unconstitutional as Article 1 section 8 allows the government to borrow and to mint gold and silver coins, but "not emit bills of credit" aka Federal Reserve Notes. There's no mention of a “US national currency.”
The one dissent in the above case is worth noting. Justice Field dissented, challenging the court's interpretation of the terms to "borrow" and "coin" money. Field asserted that the meaning of the terms ‘to coin money’ was not at all doubtful: “It is to mold metallic substances into forms convenient for circulation and to stamp them with the impress of the government.” Field argued that in the clause authorizing congress “to provide for the punishment of counterfeiting the securities and current coin of the United States,” a distinction was clearly made between debt and coin. Justice Field also cited many quotes by the US founders against paper money, including the following by James Madison:
"The pretext for paper currency, and particularly for making the bills a tender either for public or private debts, was cut off."
Lastly Field's foretelling brilliance -
From the decision of the court I see only evil likely to follow. There have been times within the memory of all of us when the legal-tender notes of the United States were not exchangeable for more than one-half of their nominal value. The possibility of such depreciation will always attend paper money. This inborn infirmity no mere legislative declaration can cure. If Congress has the power to make the notes a legal tender and to pass as money or its equivalent, why should not a sufficient amount be issued to pay the bonds of the United States as they mature? Why pay interest on the millions of dollars of bonds now due when Congress can in one day make the money to pay the principal? (That is my question.)
And why should there be any restraint upon unlimited appropriations by the government for all imaginary schemes of public improvement, if the printing-press can furnish the money that is needed for them?
So why are bankers getting this great deal? Because Congress can't issue to itself campaign contributions! But banks can make all kinds of wealth making deals for so called "public servants.”
For example, Mitch McConnell's net worth is listed at $9.2 to $36 million dollars (the 10th richest, while his counterpart Harry Reid is worth $10 million. In fact, 50.8% of Congress and 67% of the Senate (“public servants”) are millionaires (as of 1/15/15).
“The Federal Reserve banks are one of the most corrupt institutions the world has ever seen. There is not a man within the sound of my voice who does not know that this nation is run by the International bankers.” -- Congressman Louis T. McFadden
WSJ Editorial Explains US Political Mentality:
A March 14th WSJ editorial by Joseph Epstein titled “The Political Stupidity of the Jews Revisited" cites examples of government policy against Jews in two presidential administrations. Epstein wrote:
The story has it that during the George H.W. Bush administration, James Baker proposes to his boss an idea that would go against Israeli interests. “The Jews aren’t going to like it,” President Bush says. Mr. Baker replies: “They don’t vote for us anyway—screw ’em!” Fast forward 15 years, when Rahm Emanuel proposes a different idea to his boss that would also go against Israeli interests. “The Jews aren’t going to like it,” President Obama says. Mr. Emanuel replies: “They vote for us anyway—screw ’em!”
Through federal regulation and high taxation, the Democratic Party has done what it could to strangle the entrepreneurial spirit that was once the pride of the Jewish middle class. Only a schmuck works for someone else is, in some quarters, the 11th Jewish commandment. For the current political season, I propose a 12th: Vote your mind, not your ethnicity.
Conclusions and Historical Quotes:
The US government in all its activities, has become corrupt in so many ways, one can write a two volume book on it. For this short blog post I chose the Fed as an example, because it has the largest influence on all of us living today and in the future.
To understand why the US government is permeated by corruption it is best to view the people who are enticed by power over their fellow citizens. Leo Tolstoy offered us the following insight into such "public servants:"
Charles-Louis de Secondat, Baron de La Brède et de Montesquieu, who was famous for his articulation of the theory of separation of powers, which is implemented in many worldwide constitutions (especially the US) wrote:
"EXPERIENCE CONSTANTLY PROVES THAT EVERY MAN WHO HAS POWER IS IMPELLED TO ABUSE IT."
Please remember those words, especially when you read “news” or “comment and analysis” from the mainstream media.
Good luck and till next time...
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Curmudgeon is a retired investment professional. He has been involved in financial markets since 1968 (yes, he cut his teeth on the 1968-1974 bear market), became an SEC Registered Investment Advisor in 1995, and received the Chartered Financial Analyst designation from AIMR (now CFA Institute) in 1996. He managed hedged equity and alternative (non-correlated) investment accounts for clients from 1992-2005.
Victor Sperandeo is a historian, economist and financial innovator who has re-invented himself and the companies he's owned (since 1971) to profit in the ever changing and arcane world of markets, economies and government policies. Victor started his Wall Street career in 1966 and began trading for a living in 1968. As President and CEO of Alpha Financial Technologies LLC, Sperandeo oversees the firm's research and development platform, which is used to create innovative solutions for different futures markets, risk parameters and other factors.
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