Banking 5/7

Dealing with the conspiracists

The oft-given explanation circulating around the internet is that banking originated from goldsmiths is misleading as it suggests that this was widespread when there may only have been the odd example of this. There is one film (Money As Debt) which gives the impression that every mediaeval and early capitalist town had goldsmiths who did this. Currency cranks  use the goldsmith argument fairly extensively to show that a bank can lend more than has been deposited with it. It is also strange that this historical theory should be widespread in the US where there would ever have been any goldsmiths who did this (if only because the money-commodity there was silver to start with) and where paper money originated from the states printing it and making it legal tender for paying taxes.

Adam Smith makes no mention of "goldsmith bankers". His description of how the Bank of Amsterdam operated confirms that the currency cranks have not been able to produce any example of a bank that issued more certificates of receipts than the gold it had (and survived). Only a state or state-guaranteed bank can issue "fiat" money as money not backed by anything.

It would be much more likely that banking originated from moneylending, which would have been more widespread, when people with money to lend began issuing trade bills to factory owners and merchants to cover the period between production and sales. And if they started issuing more bills than they could honour (as goldsmiths are supposed to have done) they'd go bankrupt fairly quickly.

There were some goldsmith-bankers in London in the 17th century (but not in every town). Here's an example of how the currency cranks interpret what they say happened:

But the goldsmith-bankers seem rather to have been more like pawnbrokers for the idle rich according to this article.

A contemporary account of how goldsmith bankers actually operated can be in Richard Cantillon's "Essai sur la nature du Commerce en General" (it's in English) written in 1730. Here's what he wrote:

"If a hundred economical gentlemen or proprietors of land, who put by every year money from their savings to buy land on occasion, deposit each one 10,000 ounces of silver with a goldsmith or banker in London, to avoid the trouble of keeping this money in their houses and the thefts which might be made of it, they will take from them notes payable on demand. Often they will leave their money there a long time, and even when they have made some purchase they will give notice to the banker some time in advance to have their money ready when the formalities and legal documents are complete. In these circumstances the banker will often be able to lend 90,000 ounces of the 100,000 he owes throughout the year and will only need to keep in hand 10,000 ounces to meet all the withdrawals. He has to do with wealthy and economical persons; as fast as one thousand ounces are demanded of him in one direction, a thousand are brought to him from another. It is enough as a rule for him to keep in hand the tenth part of his deposits. There have been examples and experiences of this in London. Instead of the individuals in question keeping in hand all the year round the greatest part of 100,000 ounces the custom of depositing it with a banker causes 90,000 ounces of the 100,000 to be put into circulation. This is primarily the idea one can form of the utility of banks of this sort. The bankers or goldsmiths contribute to accelerate the circulation of money. They lend it out at interest at their own risk and peril, and yet they are or ought to be always ready to cash their notes when desired on demand. If an individual has 1000 ounces to pay to another he will give him in payment the banker's note for that amount. This other will perhaps not go and demand the money of the banker. He will keep the note and give it on occasion to a third person in payment, and this note may pass through
several hands in large payments without any one going for a long time to demand the money from the banker. It will be only some one who has not complete confidence or has several small sums to pay who will demand the amount of it. In this first example the cash of a banker is only the tenth part of his trade."

Nothing here about the goldsmith banker being able (or even trying) to lend more than the 100,000 ounces of silver deposited with them, as in the fairy tales of the currency cranks.

Cantillon's full account of how the banks of his time operated can be found in Chapter VI




Sometimes people end up talking at cross purposes because they are referring to different things when they use the word 'money'. It is partly a question of definition, with the definition of money changing over the years. The Socialist Party of Great Britain tend to stick the definition inherited from Classical Political Economy, via Marx, Professor Cannan an economist from early part of the 20th century,  and one of its members Hardy, a researcher with the Post Office trade union: that it's essentially cash (notes and coins). This is what the statisticians call M0 (minus the reserves that banks keep with the central bank). Only the government, via the central bank, can create money in this sense. It does so by mere decision, by creating more "fiat" ("let it be") money and introduces it into circulation by using it to buy government bonds off commercial banks ("quantitative easing" is a variety of this). If two different definitions of money as being used it is easy to see how quite different conclusions about "the money supply" and its effects can arise depending on which definition is used. In the past it used to be "can the banks create credit?". Now it's become "can the banks create money?" The answer is the same but the issue was less confusing when the claim was just about credit not money. Obviously banks can supply credit (even if not out of nothing), but they can't create money unless this is defined as including bank loans (in which case they do so by definition). Perhaps a better approach today is to talk about 'credit' and 'wealth'? An expanision in bank loans is an expansion of the money supply (in terms of M1, M2, M3 and M4). But is this necessarily an expansion of wealth? Obviously not.

Even the economic textbooks are compelled to make a distinction been "base money" (which only the government and central bank can create) and "bank money" (bank and other loans, which banks and other financial institutions can "create"). It's less confusing to regard only "base money" as money and to call bank loans "bank loans". See this article by Hardy : http://www.marxists.org/archive/hardcastle/creatingcredit.htm

These days, most economics textbooks also include bank (and other) loans in the definition of "money", what the statiticians call M1, M2 and M3. In which case, as giving loans is what banks do, of course they "create money" -- but only by definition. The question that arises is where do they get the money they loan. Some currency cranks imagine that they do this "out of thin air" by pressing a computer key (they used to say by "a stroke of the pen"), but this is wrong. Banks can only lend what they get from depositors or which they themselves borrow or which they have as their capital. What they lend has to exist already.

The case against regarding both bank loans and currency as money is that they come into being and behave differently. Currency circulates. Bank loans don't. In fact, although M0 is only only about 3% of M1 it can be used to make payments, etc (including bank deposits and bank loans) of many times its face value. There is of course a huge difference between the amount of notes and coins in circulation and the amount of bank loans, but this is what you would expect since notes and coins circulate and so can be used to make many payments and many loans.

But even accepting that bank loans are money, banks do not create it out of thin air (as is often claimed). No bank can lend more than it has, either as deposits or what it has itself borrowed. In fact, because they have to keep some of what they have as cash, they can only lend less than they have. In the past, in Britain, they had to keep about 8% of their assets as cash. Now it's down to about 3%. This is the "fraction" of assets they have to keep as a "reserve" against withdrawals. Hence the "fractional reserve banking" that currency cranks make such a fuss about. But all lending institutions do this (building societies, savings clubs and credit unions too). If they didn't, all they would be would safe deposits. It's what lending other people's money involves.

The first mistake that some crass currency cranks make about this is that they assume that, with a fractional reserve of 10%, if someone deposits £100 in a bank this means that the bank can then lend out a sum of which this is 10% (less a £100), ie £900. In fact, it means only that the bank can lend out £90 as it has to keep 10% (£10) as cash.

It is true that economics textbooks do teach that the banking system as a whole (but not a single bank on its own) can, with an initial deposit of £100, eventually make loans totalling £900. The assumption is that the first bank makes a loan of £90, which is then deposited in a second bank which can then lend 90% of this (£81), which is then deposited in a third bank which can then lend out 90% of £81, until eventually total loans of £900 will have been made.

There is nothing wrong with this theoretical model as such, only with the claims that are made about it. Even the textbooks claim that the £900 has been created by the banks together, but in fact it depends on the money from loans being repeatedly re-deposited in the system. So, it could just as logically be claimed that it was the depositors that created the loans as they provided the banks with the money to lend. In fact this refutes the second mistake that currency cranks make: saying that all money (bank loans) comes into being as "debt". They don't. They come into being as previous deposits. What is happening is that money is circulating throughout the banking system, but there's nothing mysterious about that as circulating is what money does.

A New Economics Foundation video starts with a quote for Sir Reginald McKenna, dating from 1924, when he was chairman of Midland Bank (now HSBC) though it gives the impression that it dates from 1915-6 when he was Chancellor of the Exchequer, which is all over the internet on Monetary Reform sites including US ones. And he was a member of the 1931 Macmillan Committee. New Economics Foundation video starts with a quote for Sir Reginald McKenna, dating from 1924, when he was chairman of Midland Bank (now HSBC) though it gives the impression that it dates from 1915-6 when he was Chancellor of the Exchequer, which is all over the internet on Monetary Reform sites including US ones. This is how the Times of the time (26 January 1924) reported what he said. The passage in question is :

"I am afraid the ordinary citizen will not like to be told that the banks can, and do, create and destroy money. The amount of finance in existence varies only with the action of the banks in increasing or decreasing deposits and bank purchases. We know how this is effected. Every loan, overdraft, or bank purchase creates a deposit, and every repayment of a loan, overdraft, or bank sale destroys a deposit."

This passage is not in the Times report (maybe it was left out, as is possible) but this is:

"While banks have this power of creating money it will be found that they exercise it only within the strict limits of sound banking policy. Anyone who studies the monthly statements of the London Clearing Banks will find that these banks keep a reserve of cash fairly constant in relation to their deposits. If banks increased their loans and investments the result would be to increase the aggregrate amount of their deposits, but to add nothing to their cash resources. The proportion of cash to deposits would be reduced, and, in the judgement of those responsible for the management of the banks, would be less than sound banking principles dictated. Thus a limit is placed on a bank’s power of lending by the amount of its cash and, so long as the canons of conservative banking are conformed to, additional loans can only be made if this cash is increased. Banks lend or invest up to the full amount by their cash resources, but they do not go beyond that point."

Which gives a rather different interpretation as to what he meant than has been suggested. Yet another dubious quote from the currency cranks hits the dust. This time another quote from another banker of the time, Walter Leaf, chairman of Westminister Bank (now the NatWest, part of RBS) that virtually only be found on our and related sites:

"The banks can lend no more than they can borrow – in fact not nearly so much. If anyone in the deposit banking system can be called a 'creator of credit' it is the depositors; for the banks are strictly limited in their lending operations by the amount which the depositors think fit to leave with them." (Banking, Home University Library edition, 1926, p. 102)

Those who support McKenna's position ought at least to be aware of his contemporary Walter Leaf's view.

Some other banking and currency cranks are always quoting Sir Josiah Stamp, a director of the Bank of England in the 1930s, as saying:

"The modern banking system manufactures money out of nothing. The process is perhaps the most astounding piece of sleight of hand that was ever invented. Banking was conceived in iniquity and born in sin. Bankers own the earth; take it away from them, but leave them with the power to create credit, and with the stroke of a pen they will create enough money to buy it back again ... If you wish to remain slaves of Bankers, and pay the cost of your own slavery, let them continue to create deposits."

Yet David Graeber in his book on debt comments:

"It seems extremely unlikely that Lord Stamp ever really said this, but the passage has been cited endlessly—in fact, it's probably the single most often-quoted passage by critics of the modern banking system." In a footnote  Graeber  goes into more detail: "Said to have been given at a talk at the University of Texas in 1927, but in fact, while the passage is endlessly cited in recent books and especially on the internet, it cannot be attested to before roughly 1975. The first two lines appear to actually derive from a British investment advisor named L.L.B. Angas in 1937: "The modern Banking system manufactures money out of nothing. The process is perhaps the most astounding piece of sleight of hand that was ever invented. Banks can in fact inflate, mint and unmint the modern ledger-entry currency" (Angas, Slump Ahead in Bonds, New York, 1937: 20-21). The other parts of the quote are probably later inventions—and Lord Stamp never suggested anything like this in his published writings. A similar line, "the bank hath benefit of all interest which it creates out of nothing" attributed to William Patterson, the first director of the Bank of England, is likewise first attested to only in the 1930s, and is also almost certainly apocryphal."

Here is the real quote:
"Banking was conceived in iniquity and was born in sin. The Bankers own the Earth. Take it away from them, but leave them the power to create deposits, and with the flick of the pen they will create enough deposits to buy it back again. However, take it away from them, and all the great fortunes like mine will disappear, and they ought to disappear, for this would be a happier and better world to live in. But if you wish to remain the slaves of Bankers and pay the cost of your own slavery, let them continue to create deposits."

The quote often worded to make it appear as though Stamp was talking about credit and Central Banking, rather he was talking about people putting their money in banks at all.

In other words, some banking/currency crank made up these quotes and others just reproduce them as genuine. Other examples are the following.

Many have engaged in debate with both right and left critics of the banking system and one of the "evils" is the creation of the Fed Reserve in 1913 and Woodrow Wilson is frequently quoted expressing his regret for it: "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. The growth of the nation, therefore, and all our activities are 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 civilized world -- no longer a Government by free opinion, no longer a Government by conviction and the vote of the majority, but a Government by the opinion and duress of a small group of dominant men."

Once again this is a made-up quote:

As we see many proponents of the banking conspiracy include quotes from various people in history to give the the impression that "something else is going on", but we should be aware of the true meaning behind these quotes and  place them into the context of these quotes and see what they were really talking about.

"There is something behind the throne greater than the king himself." - Sir William Pitt, House of Lords 1770

 The quote in full is "A long train of these practices has at length unwillingly convinced me that there is something behind the throne, greater than the throne itself." What William Pitt was talking about, was a scandal of sorts, how King George III was under too much influence from Lord Bute, and how it seemed as though the King didn't care about what the French were saying. The speech this quote came from was made in 1770, six years after the King had already stopped seeing Lord Bute, and Pitt knew this. The purpose of the statement was to imply the King was weak; it was nothing more than an insult.

"The world is governed by very different personages from what is imagined by those who are not behind the scenes." - Benjamin Disraeli, English Statesman 1844

This quote originates from a book written by Disraeli in 1844 which is a fictional account of the life and career of Henry Coningsby and his politics. Essentially the whole thing is Disraeli voicing his opinion to the Reform Bill of 1832, the British Whig Party, and Utilitarianism. This quote is frequently misrepresented by Anti-Semitic individuals who wish to prove that Jews control the world. In reality the context of the quote was discussion the concept behind governmental alliances. Thus it makes sense that things are run "behind the scenes" if governments make agreements with others to do or not to do something.

"The real truth of the matter is that a financial element in the large centers has owned the government since the days of Andrew Jackson." - Franklin D Roosevelt, US President 1933

The "source" of this quote is apparently a letter sent from Roosevelt to Colonel Edward M House, and can be received from Sterling Library at Yale University or from Radio Liberty. The only location sources on the Internet that references this letter that are conspiracy website or in posts on a forum written by someone who is promoting a conspiracy theory. Yale's library database yields nothing.

In the American Revolutionary War began the American colonies sought to detach from England, and it's oppressive monarchy. Although many reasons are cited for the revolution, one in particular sticks out as the prime cause: that King George III of England outlawed the interest free independent currency the colonies were producing and using for themselves, in turn forcing them to borrow money from the Central Bank of England at interest, immediately putting the colonies into debt. And as Benjamin Franklin later wrote:

"The refusal of King George III to allow the colonies to operate an honest money system, which freed the ordinary man from the clutches of the money manipulators was probably the prime cause of the revolution."

First, there were many causes of the American Revolution, a big one was "taxation without representation", and indeed Benjamin Franklin did comment later in 1800 stating that he believed the ridiculous money system imposed on the colonies was a cause for the revolution. That is, where the colonies had to essentially ship massive amounts of money back to England because they imported more than they exported. King George III outlawed the colonies from making their own money period, despite the wording of this, implying that somehow it was only the interest free money that they were outlawing. The English economic style was that of money being loaned at interest to the government, from private companies. It is worth noting, that not all Central Banks are privately owned, nor do all Central Banks issue Fiat currency (money based on several things, such as payment of taxes and credible enforcement), some do back their money with gold.

Central Banks

In 1783 America won its independence from England. However, its battle against the central bank concept and the corrupt, greed-filled men associated with it had just begun.

So what is a Central Bank? A Central Bank is an institution that produces the currency of an entire nation. Based on historical precedent, two specific powers are inherent in central banking practice. The control of interest rates, and the control of the money supply, or inflation. A central bank does not simply supply a government's economy with money, it loans it to them at interest. Then, through the use of increasing and decreasing the supply of money, the central bank regulates the value of the currency being issued. It is critical to understand that the entire structure of this system can only produce one thing in the long run: debt.

Banking critics say it doesn't take a lot of ingenuity to figure this scam out. For every single dollar produced by the central bank is loaned at interest, that means every single dollar produced is actually the dollar plus a certain percent of debt based on that dollar. And since the central bank has a monopoly over the production of the currency for the entire country, and they loan each dollar out with immediate debt attached to it, where does the money to pay for the debt come from? It can only come from the central bank again. Which means the central bank has to perpetually increase its money supply to temporarily cover the outstanding debt created, which in turn, since that new money is loaned out at interest as well, creates even more debt! The end result of this system without fail is slavery. For it is impossible for the government and thus the public, to ever come out of the self-generating debt.

However, the primary reason a central banking system was implemented is because "free banking systems", that is ones that are not centralized, were unstable. Between 1837 and 1862, a time when we had free banking, banks issued their own bank notes, which were backed against their own gold and silver, and states regulated reserve requirements, interest rates on loans and deposits, and so forth. The problem with this system is it created a lot of unstable banks. In fact, banks would only last around 5 years before going bankrupt because they could no longer redeem the notes of customers. A third of banks failed during the free banking era.

Imagine going to a bank today, and them telling you that your paper money is actually worthless, you can't buy or sell anything with it. Of course, this is implied later by saying the Federal Reserve System creates worthless money.

Contrary to claims the Federal Reserve does not increasingly create debt. The total debt mounted each year by the Federal Reserve is only about 7% of the total national debt. The Federal Reserve rebates its net earnings to the Treasury every year, thus the money borrowed from the Federal Reserve has no net interest obligation for the treasury.

If we travel back to a time when banks made their own currency, we also had the problem of going to multiple banks. We can imagine if banks still did that, we'd probably wind up with a bank monopoly anyway, because people would want the convenience of being able to use the same money everywhere, especially businesses. Instead the Central Banking system allows businesses and people to deal less with converting all the tons of different bank notes they receive, and allows them to more easily save their money in cash or coin form, or in a bank backed up by the FDIC.

"I believe that banking institutions are more dangerous than standing armies... If the American people ever allow private banks to control the issue of currency... the banks and corporations that will grow up around them will deprive the people of their property until their children wake up homeless on the continent their fathers conquered." - Thomas Jefferson. Another supposed quotation. It is attributed to a letter that simply didn't exist. There are letters that supposedly contained this quote but the other sentences in these letters were actually from different letters to different people. The entire quote in the film cannot be attributed to Thomas Jefferson, at all, anywhere. It is not in  his complete works. It was fabricated from somewhere. In his correspondence Thomas Jefferson was worried about banks being able to create their own currency, the exact thing the Central Bank system prevents.

The history of central banks in the US begins with the First Bank of the United States, the first central bank that America had, and it was chartered by Congress after being proposed by Alexander Hamilton, one of our most important founding fathers. The purpose was not unlike our current system. It was to establish financial order, clarity, and precedence. Credit was also established, both in the US and overseas. It was also established to resolve the messy issue of fiat currency issued by the Continental Congress. Thomas Jefferson was not necessarily up in arms against it, rather he was not too interested in the idea, as he believed that the South would not benefit because it was an agricultural economy that did not require central banking.

After the charter for the First Bank of the United States expired, five years later the Second Bank of the United States was chartered in order to stabilize the currency. It was founded by noted friend of Thomas Jefferson and Founding Father, James Monroe. It was also created when James Madison and Albert Gallatin found the government was unable to finance the country in the aftermath of the War of 1812, which had put the country into a lot of debt. New privately formed banks printed bank notes as a result of this debt, which increased inflation greatly. Unfortunately, due to mismanagement and not having the protections the central bank does now, it became corrupt towards its end, and the nation's money was removed from it and transferred to a different bank. Quickly the Second Bank went bankrupt and turned into the Bank of Philadelphia.

As we can see, the central banking system stabilised America a lot, especially during its formative years, and kept the country stable in times of crisis. What a central bank does, among other things, is to print money and, with that money, buy public bonds of the state, making sure the interest rates on those bonds are reasonable and do not become excessive. (The U.S. Federal Reserve, for example, has created more than $2.3 trillion since 2008 and used it to buy U.S. government bonds and mortgage-backed securities).  The central bank protects states against the financial market’s speculation.

Some conspiracists argue that the dominant families in the banking and business world, the Rockefellers, the Morgans, the Warburgs, the Rothschilds, and in the early 1900s, sought to push once again, legislation to create another central bank. However, they knew the government and public were weary of such an institution, so they needed to create an incident to affect public opinion by inciting panic

So, J.P. Morgan, publicly considered a financial luminary at the time, exploited his mass influence by publishing rumors that a prominent bank in New York was "insolvent", or bankrupt. Morgan knew this would cause mass hysteria, which would affect other banks as well, and it did. The public, in fear of losing their deposits, immediately began mass withdrawals. Consequently the banks were forced to call in their loans, causing the recipients to sell their products, and thus a spiral of bankruptcies, repossessions, and turmoil emerged.

Fredrik Allen of LIFE Magazine wrote: "The Morgan interests took advantage... to precipitate the panic [of 1907] guiding it shrewdly as it progressed."

Trying foot the blame on JP Morgan for the 1908 Bankers' Panic does not stand up to historical facts. The biggest contributor to the panic was actually the Knickerbocker Trust Company, which copied speculation tactics of Charles W. Morse, who had obtained Bank of North America and several other banks to float consolidations schemes. In any case, over-expansion and poor speculation led to a stock market crash in early 1907. If that weren't enough, the stock market crashed again in October of that year. This is why banks called in their loans, not because of some newspaper article that was published which has never been referenced. In any case, JP Morgan actually helped the situation when he organized a team of bank and trust executives. This helped avoid complete economic ruin for the American economy by redirecting money between banks, security international lines of credit, and bought stock of healthy corporations to keep them from bankrupting.

Unaware of the fraud, the Panic of 1907 led to a Congressional investigation, headed by Senator Nelson Aldrich, who had intimate ties to the banking cartels, and later became part of the Rockefeller family through marriage. The Commission led by Aldrich recommended a Central Bank should be implement so a panic like 1907 could never happen again. This was the spark the international bankers needed to initiate their plan. Unaware, perhaps, because there was no fraud taking place. Actually what happened was, Nelson Aldrich spent some time traveling around Europe, and believed the English, German, and French central banking systems were far better than what was going on in the US at the time. He was a firm believer in the progressive concepts of efficiency and science; so it is no surprise he wanted a system that worked well, easily, and was stable. He worked with various bankers and economists to design a plan for the central banking system he had in mind. In fact, he promoted a central banking concept that was decentralized, making it hard to believe he was in on any large conspiracy.
In 1910, a secret meeting was held at a J.P. Morgan estate on Jekyll Island off the coast of Georgia. It was there that the central banking bill called the Federal Reserve Act was written. This legislation was written by bankers, not lawmakers. This meeting was so secretive, so concealed from government and public knowledge, that the 10 or so figures who attend, disguised their names when en route to the island.

Back in 1910 banking reform was a big issue in the United States, and Nelson Aldrich -- as we already discussed -- had seen how several European countries had Central Banking systems and helped draft a plan for one in the United States. This meeting was not that secretive. We know exactly who attended:

    Nelson Aldrich, US Senator
    AP Andrews (Assistant Secretary of the Treasury Department)
    Paul Warburg (Kuhn, Loeb, & Co)
    Frank A Vanderlip (President, National City Bank of New York)
    Henry P Davison (Senior Partner, JP Morgan Company)
    Charles D Norton (President, First National Bank of New York)
    Benjamin Strong (Representing JP Morgan)

Federal Reserve Act

After this bill was constructed, it was then handed over to their political front man, Senator Nelson Aldrich, to push through Congress. And in 1913 with heavy political sponsorship by the bankers, Woodrow Wilson became President, having already agreed to sign the Federal Reserve Act in exchange for campaign support. And two days before Christmas when most of Congress was at home with their families, the Federal Reserve Act was voted in, and Wilson in turn made it law.

It really didn't need to be "handed over to him", because he already had it, considering he was the primary person behind it. While Woodrow Wilson did get some money from corporations, most of the money was from smaller donations, not banks.

The Act had been debated and discussed for more than 4 months prior to being voted on. It passed the House on December 22, 1913 with 298 yeas to 60 nays, with 76 not voting (even if they would have voted all nay, it would still have been a majority of yeas). The next day the Senate passed it, 43 yeas to 25 nays, with 27 not voting. The record shows that almost all of those not voting on the bill had previously declared their intentions, and were paired with members of the opposite intentions.

Banking conspiracists present us with Woodrow Wilson's regret about the Fed's establishment. It is said that years later he wrote

"Our great industrial nation is controlled by its system of credit. Our system of credit is privately concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men who, even if their action be honest and intended for the public interest, are necessarily concentrated upon the great undertakings in which their own money is involved and who necessarily, by very reason of their own limitations, chill and check and destroy genuine economic freedom."

"We have come to be one of the worst ruled, one of the most completely controlled and dominated, governments in the civilized world--no longer a government by free opinion, no longer a government by conviction and the vote of the majority, but a government by the opinion and the duress of small groups of dominant men."

The first quote is actually changed a bit, the original is:
"A great industrial nation is controlled by its system of credit. Our system of credit is privately concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men who, even if their action be honest and intended for the public interest, are necessarily concentrated upon the great undertakings in which their own money is involved and who necessarily, by very reason of their own limitations, chill and check and destroy genuine economic freedom."

What's most interesting is that this originally was in a speech from 1912, so how could he be regretting something that hasn't happened yet?

The second quote is also different, but only slightly edited:
 "We have restricted credit, we have restricted opportunity, we have controlled development, and we have come to be one of the worst ruled, one of the most completely controlled and dominated, governments in the civilized world--no longer a government by free opinion, no longer a government by conviction and the vote of the majority, but a government by the opinion and the duress of small groups of dominant men."
As with the first quote, this quote is from before the Federal Reserve Act even existed. This is actually from his 1912 campaign speech.

How can he regret something that hasn't happened yet?

Congressman Louis McFadden is also frequently quoted and credited with expressing the truth after the passage of the bill:

"A world banking system was being set up here... a Superstate controlled by international bankers... acting together to enslave the world for their own pleasure. The Fed has usurped the government."
Once more sources for this quote are entirely conspiracy websites. Louis McFadden was quite a shady individual, and he believed that Jews controlled the world, most specifically the American economy. McFadden also blamed Jews for various changes in the American economy, including the Federal Reserve. He was also a major supporter of Hitler and the Nazi policies that were anti-Semitic; more specifically he supported Hitler's attempts to destroy the alleged Jewish control over the German economy, media, education, and business. When he ran for president in 1936, one of his campaign slogans was "Christianity instead of Judaism"

Therefore, in the quote above, if we replace bankers and Fed with "Jews", then we can get a picture of what McFadden was actually talking about. If he believed the banks were controlled by Jews and the Federal Reserve was a Jewish "problem", then it is safe to make such an assumption to change the words to show the truth behind what he was saying.

Actually, many of  the US economic booms and slumps can be attributed to international trading of oil, over-investments in unknown areas (such as the dot com boom), or private loans to individuals without income or assets rather than the Federal Reserve policies.

It is alleged that from 1914 to 1919, the Fed increased the money supply by nearly 100%,  resulting in extensive loans to small banks and the public. Then in 1920, the Fed called in massive percentages of the outstanding money supply, thus resulting in the supporting banks having to call in huge numbers of loans, and just like 1907: bank runs, bankruptcy, and collapse occurred. Over 5400 competitive banks outside of the Federal Reserve System collapsed which further consolidated the monopoly to a small group of international bankers.

But the reality was that until the fall of 1914 the Federal Reserve was essentially on the sidelines, due to political and administrative delays. However, the increases were primarily due to the massive amounts of gold imported into the United States due to foreign countries owing the US more than $4 billion in railroad stocks. To keep up with this the treasury continued to print money. However by 1920, the First World War was over and post-war expansion peaked, causing a recession, the Federal Reserve attempted to stem the decline.

The decline caused the unemployment rate to rise from 4% to nearly 12% by 1921, this was in large part due to the fact that banks were trying to conserve gold reserves. The fact is, money backed by gold constantly lead to crisis because of banks worrying more about the gold than expansion. As for the "over 5,400 competitive banks", something is wrong with that figure, considering during the 1920s, there was an average failing of only 70 banks per year, which would be 77 years to be 5,400. This was nothing unusual at the time, considering prior to the Federal Reserve system, the average life-span of a bank was merely 5 years.

Congressman Lindbergh stepped up, and said in 1921: "Under the Federal Reserve Act, panics are scientifically created. The present panic is the first scientifically created one, worked out as we figure a mathematical equation."

Again this quote is mostly likely fabricated; however there is no doubt Congressman Lindbergh was against the Federal Reserve Act.

Fed critics then argue that the panic of 1920 was just a warm-up and from 1921 to 1929 the Fed again increased the money supply resulting once again in extensive loans to the public and banks. There was also a fairly new type of loan called a margin loan in the stock market. Very simply, a margin loan allowed an investor to put down only 10% of a stocks price, with the other 90% being loaned through the broker. In other words, a person could own $1000 worth of stock with only $100 down. This method was very popular in the roaring 1920s, as everyone seemed to be making money in the market. However, there was a catch to this loan. It could be called in at any time, and had to be paid within 24 hours. This is termed a margin call, and the typical result of a margin call is the selling of the stock purchased with the loan.

Actually the 20s saw a reduction in loans compared to previous years, and banks lost money as far as earnings went. Margins are not as simple as made out. Rather a certain amount of money was used as collateral and the rest of the money equal to the amount of stock being bought as borrowed from the broker. So for example if I bought some shares of Megacorp USA for $100, buying on Margin I would put down the net value of $20 of some of my own money and the broker would put the other $80 down. The net value is calculated by (share amount - loan amount). Let's suppose, though, the share goes from $100 to $85, the net value would then be $5 -- this is when a margin call happens. A margin call is posted only when the margin loan goes below the minimum net value set by the broker. So if the broker wanted it to be a minimum of $10, and now that the stock is down to $85 and only has a net value of $5, this is when a margin call happens. A margin call does not have to be paid within 24 hours, the amount of time depends on the broker, most brokers are around 72 hours.

It is said that a few months before October of 1929, J.D. Rockefeller, Bernhard Barrack, and other insiders quietly exited the market, and on October 24th, 1929, the New York financiers who furnished the margin loans started calling them in, en masse. This sparked an instantaneous massive sell-off in the market, for everyone had to cover the margin loans. It then triggered mass bank runs for the same reason, in turn collapsing over 16,000 banks, enabling the conspiring international bankers to not only buy up rival banks at a discount, but to also buy up whole corporations at pennies on the dollar. It was the greatest robbery in American history. But that didn't stop there. Rather than expand the money supply to recover from this economic collapse, the Fed actually contracted it, fueling one of the largest depressions in history.

Interestingly it is said that JD Rockefeller exited the market when he, along with the other "insiders", were buying up huge chunks of of stocks in order to try to curb the massive selling by showing the public they trusted the market. The reality is much different. "A few months before" is in September 1929, at this time the market slipped a lot, losing 17% of the total value. However it slowly started going up again until October 24th (Black Tuesday) when a record number of 12.9 million shares were traded. Essentially chaos ensued, several big boys in the industry, including Morgan and Chase tried to find a way to stem the selling. They acted through a intermediary to purchase a huge block of US Steel at a price well above the market price, this was a similar tactic that ended the panic in 1907. It halted the slide for that day as planned, but it was only temporary.

Over the weekend the events were covered in the newspapers across the country, and on Monday, October 28, more investors decided to get out of the market, and a record loss of nearly 13% occurred that day. The next day, called Black Tuesday, 16.4 million shares were traded, a record set that would not be broken again until 1969. The Dow Jones Industrial Average lost another 12% that day. The market lost $14 billion in a single day, with a total week loss of $30 billion. During this week is when Rockefeller and others attempted to stem the selling as I noted above. This hardly makes them "exit the market". They had just as much to lose as the layman if the market fell, making a conspiracy illogical and stupid on their part.

Once again outraged, Congressman Louis McFadden, a long-time opponent of the banking cartel, began bringing impeachment proceedings against the Federal Reserve Board, saying of the crash and depression:

"It was a carefully contrived occurrence. International bankers sought to bring about a condition of despair, so that they might emerge the rulers of us all."

Congressman Louis McFadden, long time anti-Semite, believed that the "banking cartel" was run by Jews, and moved to impeach president Hoover in 1932 and he went to bring conspiracy charges against Board of Governors of the Federal Reserve. The impeachment resolution was defeated by a vote of 361 to 8. Yes, just eight people voted for it. As previously mentioned  McFadden believed International Bankers were a Jewish conspiracy and that Jews controlled American banks and the Federal Reserve, therefore he thought it must have been a Jewish conspiracy to make the market crash. Who else, in his mind, but the Jews would want to make American suffer just for their evil personal ambitions?

Conspiracists declare that after 2 previous assassination attempts, McFadden was poisoned at a banquet before he could push for the impeachment.

He was poisoned and died in 1936, however he did attempt to bring the impeachment and conspiracy charges forth in 1933, and they were overturned, as we discussed; he did not die for another 3 years after that -- so it was not some kind of conspiracy to keep him from impeaching anyone.  No one knows why he was poisoned, but some think it was his opposition to the Federal Reserve system. We may never know.

Anti-Fed Reserve conspirators insist that having reduced the society to squalor, the Federal Reserve bankers decided that the Gold Standard should be removed. In order to do this, they needed to acquire the remaining gold in the system. So, under the pretense of helping to end the depression came the 1933 gold seizure. Under threat of imprisonment for 10 years, everyone in America was required to turn in all gold bullion to the Treasury, essentially robbing the public of what little wealth they had left. At the end of 1933, the gold standard was abolished. If you look at a dollar bill from before 1933, it says it is redeemable in gold. If you look at a dollar bill today, it says it is legal tender, which means it is backed by absolutely nothing. It is worthless paper.

Actually the Gold Standard was not abandoned at this time, instead something very different happened. The causes of the great depression were not completely clear, but in order to address the perceived causes and effects, Executive Order 6102 was signed on April 5, 1933 -- its purpose was to keep people from hoarding gold, by outlawing ownership of gold by an individual person or corporation greater than the amount of $100 (~$1,500 today) in value. The government required holders of large quantities of gold to sell their gold at the prevailing price of $20.67 per ounce -- later on the price was raised to $35 per ounce, and the government devalued dollars by 41% of the previous value. Money was still redeemable in silver and gold before August 15, 1971 when Richard Nixon announced the US would abandon the gold standard. The limitation on gold ownership no longer exists, anyone can own any amount of gold they wish.

"Give me control of a Nation's money supply, and I care not who makes its laws."  - Mayer Amschel Rothschild, founder of Rothschild Banking Dynasty

This quote has nothing to do with the Federal Reserve, in fact he died in 1812, long before the Federal Reserve existed. He was merely stating a fact, even if money is not backed by a central bank, it does not change the fact that if you have control over the money supply, laws mean little to you. However, that is not necessarily true in the US, where the Federal Reserve must answer to the congress, but because the Federal Reserve is private, congress cannot control it and use it for political means -- which seems ironic, but it is like a private company that is indirectly controlled by the US Congress.

It is often stated erroneously that the Federal Reserve is a private corporation, that it makes its own policies and is under virtually no regulation by the US government and is a private bank that loans all the currency at interest to the government.

Those who offer this interpretation have a very small understanding of the Federal Reserve. Yes, it is a private corporation, however it is not as private as ,say,Federal Express. It is considered private because the decisions it makes do not necessarily have to be ratified by the President or anyone else in the executive or legislature. However, the Federal Reserve has a board of governors with seats for congressional officials. The Federal Reserve is also subject to heavy oversight from Congress. Therefore, it is not necessarily private or public, rather it is "independent within the government." What a central bank does, among other things, is to print money and, with that money, buy public bonds of the state, making sure the interest rates on those bonds are reasonable and do not become excessive. (The U.S. Federal Reserve, for example, has created more than $2.3 trillion since 2008 and used it to buy U.S. government bonds and mortgage-backed securities).  The central bank protects states against the financial market’s speculation.