The Federal Reserve System


ARTICLE #4

     One of the most common concerns among people who engage in any effort
to reduce their taxes is, "Will keeping my money hurt the government's
ability to pay it's bills?"  As explained in the first article in this
series, the modern withholding tax does not, and wasn't designed to, pay
for government services.  What it does do, is pay for the privately-owned
Federal Reserve System.
     Black's Law Dictionary defines the "Federal Reserve System" as,
"Network of twelve central banks to which most national banks belong and to
which state chartered banks may belong.  Membership rules require
investment of stock and minimum reserves."
     Privately-owned banks own the stock of the Fed.  This was explained in
more detail in the case of Lewis v. United States, Federal Reporter, 2nd
Series, Vol. 680, Pages 1239, 1241 (1982), where the court said:

          Each Federal Reserve Bank is a separate corporation owned by
     commercial banks in its region.  The stock-holding commercial banks
     elect two thirds of each Bank's nine member board of directors.

          Similarly, the Federal Reserve Banks, though heavily
     regulated, are locally controlled by their member banks.

     Taking another look at Black's Law Dictionary, we find that these
privately owned banks actually issue money:

     Federal Reserve Act.  Law which created Federal Reserve banks
     which act as agents in maintaining money reserves, issuing money
     in the form of bank notes, lending money to banks, and
     supervising banks.  Administered by Federal Reserve Board (q.v.).

     The FED banks, which are privately owned, actually issue, that is,
create, the money we use.  In 1964 the House Committee on Banking and
Currency, Subcommittee on Domestic Finance, at the second session of the
88th Congress, put out a study entitled "Money Facts" which contains a good
description of what the FED is:

          The Federal Reserve is a total money-making machine.  It can
     issue money or checks.  And it never has a problem of making its
     checks good because it can obtain the $5 and $10 bills necessary
     to cover its check simply by asking the Treasury Department's
     Bureau of Engraving to print them.

     As we all know, anyone who has a lot of money has a lot of power.  Now
imagine a group of people who have the power to create money.  Imagine the
power these people would have.  This is what the Fed is.
     No man did more to expose the power of the Fed than Louis T. McFadden,
who was the chairman of the House Banking Committee back in the '30's.
Constantly pointing out that monetary issues shouldn't be partisan, he
criticized both the Herbert Hoover and Franklin Roosevelt administrations.
In describing the Fed, he remarked in the Congressional Record, House pages
1295 and 1296 on June 10, 1932, that:

          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 Federal Reserve Board, a
     Government Board, has cheated the Government of the United States and
     the people of the United States out of enough money to pay the
     national debt.  The depredations and the iniquities of the Federal
     Reserve Board and the Federal reserve banks acting together have cost
     this country enough money to pay the national debt several times over.
     This evil institution has impoverished and ruined the people of the
     United States; has bankrupted itself, and has practically bankrupted
     our Government.  It has done this through the maladministration of
     that law by which the Federal Reserve Board, and through the corrupt
     practices of the moneyed vultures who control it.
          Some people think the Federal reserve banks are United
     States Government institutions.  They are not Government
     institutions.  They are private credit monopolies which prey upon
     the people of the United States for the benefit of themselves and
     their foreign customers; foreign and domestic speculators and
     swindlers; and rich and predatory money lenders.  In that dark
     crew of financial pirates there are those who would cut a man's
     throat to get a dollar out of his pocket; there are those who
     send money into States to buy votes to control our legislation;
     and there are those who maintain an international propaganda for
     the purpose of deceiving us and of wheedling us into the granting
     of new concessions which will permit them to cover up their past
     misdeeds and set again in motion their gigantic train of crime.
          Those 12 private credit monopolies were deceitfully and
     disloyally foisted upon this country by bankers who came here
     from Europe and who repaid us for our hospitality by undermining
     our American institutions.
     The Fed basically works like this:  The government granted its power
to create money to the Fed banks.  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 Fed over the economy is universally
admitted.  Some people, especially in the banking and academic communities,
even support it.  On the other hand, there are those, both in the past and
in the present, that speak out against it.  One of these men was President
John F. Kennedy.  His efforts were detailed in Jim Marrs' 1990 book:
Crossfire:

          Another overlooked aspect of Kennedy's attempt to reform American
     society involves money.
          Kennedy apparently reasoned that by returning to the
     constitution, which states that only Congress shall coin and
     regulate money, the soaring national debt could be reduced by not
     paying interest to the bankers of the Federal Reserve System, who
     print paper money then loan it to the government at interest.
          He moved in this area on June 4, 1963, by signing Executive
     Order 11,110 which called for the issuance of $4,292,893,815 in
     United States Notes through the U.S. Treasury rather than the
     traditional Federal Reserve System.  That same day, Kennedy
     signed a bill changing the backing of one and two dollar bills
     from silver to gold, adding strength to the weakened U.S.
     currency.
          Kennedy's comptroller of the currency, James J. Saxon, had
     been at odds with the powerful Federal Reserve Board for some
     time, encouraging broader investment and lending powers for banks
     that were not part of the Federal Reserve system.  Saxon also had
     decided that non-Reserve banks could underwrite state and local
     general obligation bonds, again weakening the dominant Federal
     Reserve banks.
          A number of "Kennedy bills" were indeed issued - the author
     has a two dollar bill in his possession with the heading "United
     States Note" - but were quickly withdrawn after Kennedy's death.
          According to information from the Library of the Comptroller
     of the Currency, Executive Order 11,110 remains in effect today,
     although successive administrations beginning with that of
     President Lyndon Johnson apparently have simply ignored it and
     instead returned to the practice of paying interest on Federal
     Reserve notes.
          Today we continue to use Federal Reserve Notes, and the
     deficit is at an all time high.

     The point we're trying to make with this is that the IRS taxes you pay
aren't used for government services.  It won't hurt you or the nation to
legally reduce your tax liability.  In fact, it will help both.  And
remember.  It's your money.  You earned it.


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Updated : Wednesday, April 16, 1997 5:14:59 PMCreated: Friday Mar. 01, 1996 04:53:58 PM

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