Debunking the Federal Reserve Conspiracy Theories (and other financial myths)

[disorderlyvision]

Somone on my towns local message board posted part of this article to try and refute what I was saying. He was basically trying to say I was a conspiracy theorists :rolleyes:

http://hidhist.wordpress.com/banksters/debunking-the-federal-reserve-conspiracy-theories-and-other-financial-myths/


BY: Edward Flaherty, Ph.D. Department of Economics College of Charleston, S.C.

Facts: Yes, the Federal Reserve banks are privately owned, but they are controlled by the publically-appointed Board of Governors. The Federal Reserve banks merely execute the monetary policy choices made by the Board. In addition, nearly all the interest the Federal Reserve collects on government bonds is rebated to the Treasury each year, so the government does not pay any net interest to the Fed.

Facts: No foreigners own any part of the Fed. Each Federal Reserve bank is owned exclusively by the participating commercial banks and S&Ls operating within the Federal Reserve bank’s district. Individuals and non-bank firms, be they foreign or domestic, are not permitted by law to own any shares of a Federal Reserve bank. Moreover, monetary policy is controlled by the publically-appointed Board of Governors, not by the Federal Reserve banks.

Fact: Independent accounting firms conduct full financial audits of the Federal Reserve banks and the Board of Governors every year. The Fed is also subject to certain types of audits from the Government Accounting Office.

Facts: The Federal Reserve rebates its net earnings to the Treasury every year. Consequently, the interest the Treasury pays to the Fed is returned, so the money borrowed from the Fed has no net interest obligation for the Treasury. The government could print its own currency independent of the Fed, but there would be no effective safeguards against abuse of this power for political gain.

Facts: The Federal Reserve banks have only a small share of the total national debt (about 7%). Therefore, only a small share of the interest on the debt goes to the Fed. Regardless, the Fed rebates that interest to the Treasury every year, so the debt held by the Fed carries no net interest obligation for the government. In addition, it is Congress, not the Federal Reserve, who is responsible for the federal budget and the national debt.

Facts: Kennedy wrote E.O. 11,110 to phase out silver certificate currency, not to issue more of it. Records show Kennedy and the Federal Reserve were almost always in agreement on policy matters. He even signed legislation to give the Fed more authority to issue currency.

Facts: McFadden was incorrect regarding the Fed costing the government money. However, later economic analysis agrees with him that Federal Reserve policy blunders had a substantial role in causing the Depression. However, his implication that this was done deliberately has no basis in fact. Moreover, for a dozen years prior to his rant, McFadden had been the chairman of the House subcommittee that oversaw the Federal Reserve. Why didn’t he do anything to reform or abolish the Fed while he had the chance?

Facts: The banking system is indeed able to create money with a mere computer keystroke. However, a bank’s ability to create money is tied directly to the amount of reserves customers have deposited there. A bank must pay a competitive interest rate on those deposits to keep them from leaving to other banks. This interest expense alone is a substantial portion of a bank’s operating costs and is de facto proof a bank cannot costlessly create money.

Fact: The term ‘lawful money’ does not refer to gold or silver coin, but to types of money which the government would permit banks to use when tabulating their reserves. These types of money included, but were not limited to, gold and silver coin.

BY: Edward Flaherty, Ph.D. Department of Economics College of Charleston, S.C.

[click the link if you want to read the other "myths"]

Myth #1: The Federal Reserve Act of 1913 was crafted by Wall Street bankers and a few senators in a secret meeting.
Myth #2: The Federal Reserve Act never actually passed Congress. The Senate voted on the bill without a quorum, so the Act is null and void.
Myth# 3: The Federal Reserve Act and paper money are unconstitutional
Myth# 4: The Federal Reserve is a privately owned bank
Myth #5: The Federal Reserve is owned and controlled by foreigners.
Myth #6: The Federal Reserve has never been audited.
Myth #7: The Federal Reserve charges interest on the currency we use.
Myth #8: If it were not for the Federal Reserve charging the government interest, the budget would be balanced and we would have no national debt.
Myth #9: President Kennedy was assassinated because he tried to usurp the Federal Reserve’s power. Executive Order 11,110 proves it
The Legendary Tirade of Louis T. McFadden

[Zippyjuan]

I see nothing wrong with what that says.

[Fozz]

It is no conspiracy that the dollar lost 95+% of its value since 1913, while gaining a lot of value in the 80 years before that.

It is no conspiracy that the Federal Reserve causes the boom and bust cycles, and its attempt to centrally plan our interest rates and money supply caused this devastating recession.

It is also no conspiracy that whenever the Fed prints money, the politically well connected are the first to receive it, and working class people suffer the most from the inflation because prices rise before they get a raise. So in the grand scheme of things, the Fed redistributes wealth from the poor and middle class to the politically well connected.

Considering all these points, I think its fair to say that the Federal Reserve should finally get a full audit.

[disorderlyvision]

I see nothing wrong with what that says.

well for one:
"Fact: Independent accounting firms conduct full financial audits of the Federal Reserve banks and the Board of Governors every year. The Fed is also subject to certain types of audits from the Government Accounting Office."

They have never had a full audit. they audits they do now are very limited.

[akihabro]

If they have been successfully audited then why was HR1207 proposed?

"The government could print its own currency independent of the Fed, but there would be no effective safeguards against abuse of this power for political gain."
Fed chairmen have said again and again that they are essentially above the laws! And we are safe with them how? At least we can vote out congress members.

Edward Flaherty must have a Ph.D in social engineering.

con·spir·a·cy (kn-spîr-s)
n. pl. con·spir·a·cies
1. An agreement to perform together an illegal, wrongful, or subversive act.
2. A group of conspirators.
3. Law An agreement between two or more persons to commit a crime or accomplish a legal purpose through illegal action.
4. A joining or acting together, as if by sinister design: a conspiracy of wind and tide that devastated coastal areas.

I think this sums up how the Federal Reserve Act was passed. Bernanke threatened doom and gloom when asked by a congressman if HR1207 would pass. That sounds subversive to me.

[Elwar]

Facts: Yes, the Federal Reserve banks are privately owned, but they are controlled by the publically-appointed Board of Governors. The Federal Reserve banks merely execute the monetary policy choices made by the Board. In addition, nearly all the interest the Federal Reserve collects on government bonds is rebated to the Treasury each year, so the government does not pay any net interest to the Fed.

Publically appointed based upon a limited list of privately chosen governors.

That's like Democrats putting a presidential candidate in front of the American people and giving them the choice of whether he will or will not be the president. If not, then the Democrats bring on their next candidate. And on and on and on until the right Democrat is president. And you, the voters, appointed him.

[ewizacft]

Facts #1: Yes, the Federal Reserve banks are privately owned

Myth# 4: The Federal Reserve is a privately owned bank



I can not argue with that.

[idirtify]

well for one:
"Fact: Independent accounting firms conduct full financial audits of the Federal Reserve banks and the Board of Governors every year. The Fed is also subject to certain types of audits from the Government Accounting Office."

They have never had a full audit. they audits they do now are very limited.

So this “fact” is a lie?

[moostraks]

So this “fact” is a lie?

If the audit they did was sufficient and correct then there would be no need to fear repercussions from HR 1207.

[emazur]

Griffin has written a response to this guy before, right now the Freedom Force website is having problems so I'll cover some of this myself.

"Yes, the Federal Reserve banks are privately owned, but they are controlled by the publically-appointed Board of Governors. The Federal Reserve banks merely execute the monetary policy choices made by the Board."
To say fed officials are publically appointed implies that they are looking out for the officials of the public rather than the banks. Let's examine that -
head of the House Banking Committee, Wright Patman, launched an investigation and wrote:
11. Do private bank interests influence Federal Reserve policy?
Yes. Of the 12 members of the Open Market Committee—the Committee which actually controls credit policy—5 are presidents of regional banks. These presidents are elected by the individual regional banks’ nine-man board of directors with its preponderance of private commercial bank representatives. Further, all 12 of the regional bank presidents participate in the Open Market Committee’s discussions, though only 5 can vote. The ‘discussion’ Open Market Committee, then, has 19 members—12 regional bank presidents and the 7 members of the Federal Reserve Board
http://dewoody.net/money/

Former NY Governor Eliot Spitzer researched the composition of the Federal Reserve Board and found:
So who selected Geithner back in 2003? Well, the Fed board created a select committee to pick the CEO. This committee included none other than Hank Greenberg, then the chairman of AIG; John Whitehead, a former chairman of Goldman Sachs; Walter Shipley, a former chairman of Chase Manhattan Bank, now JPMorgan Chase; and Pete Peterson, a former chairman of Lehman Bros. It was not a group of typical depositors worried about the security of their savings accounts but rather one whose interest was in preserving a capital structure and way of doing business that cried out for—but did not receive—harsh examination from the N.Y. Fed.

The composition of the New York Fed's board, which supervises the organization and current Chairman Friedman, is equally troubling. The board consists of nine individuals, three chosen by the N.Y. Fed member banks as their own representatives, three chosen by the member banks to represent the public, and three chosen by the national Fed Board of Governors to represent the public. In theory this sounds great: Six board members are "public" representatives.

So whom have the banks chosen to be the public representatives on the board during the past decade, as the crisis developed and unfolded? Dick Fuld, the former chairman of Lehman; Jeff Immelt, the chairman of GE; Gene McGrath, the chairman of Con Edison; Ronay Menschel, the chairwoman of Phipps Houses and also, not insignificantly, the wife of Richard Menschel, a former senior partner at Goldman. Whom did the Board of Governors choose as its public representatives? Steve Friedman, the former chairman of Goldman; Pete Peterson; Jerry Speyer, CEO of real estate giant Tishman Speyer; and Jerry Levin, the former chairman of Time Warner. These were the people who were supposedly representing our interests!
http://www.slate.com/id/2217811/


Facts: No foreigners own any part of the Fed. Each Federal Reserve bank is owned exclusively by the participating commercial banks and S&Ls operating within the Federal Reserve bank’s district. Individuals and non-bank firms, be they foreign or domestic, are not permitted by law to own any shares of a Federal Reserve bank. Moreover, monetary policy is controlled by the publically-appointed Board of Governors, not by the Federal Reserve banks.

You should read the whole article, but the part that addresses this point is included below
http://www.libertyunbound.com/archive/2004_10/woolsey-fed.html
The Federal Reserve Act contained a provision for selling shares to the general public or even to the U.S. Treasury if necessary to meet a minimum capitalization for each district bank. These provisions weren't needed, and so all shares are held by member banks.13

All member banks are U.S. chartered banks — chartered by the federal government as national banks, or by one of the states. However, the stockholders of the various banks can be U.S. citizens or foreigners.

So, private investors, including foreigners, own the member banks which in turn seem to own Federal Reserve banks. That is the element of truth in the conspiracy theory.



Facts: The Federal Reserve banks have only a small share of the total national debt (about 7%). Therefore, only a small share of the interest on the debt goes to the Fed. Regardless, the Fed rebates that interest to the Treasury every year, so the debt held by the Fed carries no net interest obligation for the government. In addition, it is Congress, not the Federal Reserve, who is responsible for the federal budget and the national debt.
But who enables the US to go so deeply into debt? The Federal Reserve


Facts: McFadden was incorrect regarding the Fed costing the government money. However, later economic analysis agrees with him that Federal Reserve policy blunders had a substantial role in causing the Depression. However, his implication that this was done deliberately has no basis in fact.
There's some room for agreement here - G. Edward Griffin on p. 500 writes:
There is no evidence that the Crash was planned for the purpose of profit taking. In fact, there is much to show that the monetary scientists tried mightily to avert it, and might have done so had not their higher-priority agendas gotten in the way. Yet, once they realized the inevitability of a collapse int he market, they were not bashful about using their privelaged positions to take full advantage of it. In that sense, FDR's son-in-law, Curtis Dal, was right when he wrote: "It was the calculated 'shearing' of the public by the World Money Powers"
For more info on this advanced knowledge and subsequent shearing take a look at these 2 pages from Jekyll Island:
http://www.firstbastion.com/duckdinner1.jpg
http://www.firstbastion.com/duckdinner2.jpg

[paulitics]

"nearly all the interest the Federal Reserve collects on government bonds is rebated to the Treasury each year, so the government does not pay any net interest to the Fed"

can anyone debunk this?

[Zippyjuan]

http://www.investopedia.com/articles/economics/08/treasury-fed-reserve.asp

The Federal Reserve and the Department of the Treasury are also linked in another way. The Federal Reserve is a nonprofit company. After their expenses are paid, any remaining profits are paid to the Department of the Treasury. The Department of the Treasury then uses that money to fund government spending. It's a relationship that produces a considerable amount of money. The Federal Reserve System contributed in excess of $29 billion to the Treasury in 2006, according to the Federal Reserve Board (FRB). So, the Federal Reserve not only helps to make and implement policies, it also serves as the government's bank and generates a portion of the revenue used to fund the country's activities.

[sratiug]

The fed takes a percentage off the top regardless of their inflated expenses. It said so right on an official fed bank website last year, can't find it now. I tried to find the link cause I thought I posted it before.

[TortoiseDream]

Myth #1: The Federal Reserve Act of 1913 was crafted by Wall Street bankers and a few senators in a secret meeting.

I did a research paper on the Fed's origins. This "myth" is sadly true. Google "Nelson W. Aldrich".

[jkr]

i have had my fill of the proppaganzzza for my lifetime, but thanks for playing!

[Chester Copperpot]

Somone on my towns local message board posted part of this article to try and refute what I was saying. He was basically trying to say I was a conspiracy theorists :rolleyes:

http://hidhist.wordpress.com/banksters/debunking-the-federal-reserve-conspiracy-theories-and-other-financial-myths/

Flaherty is a crafty dude who carefully words his questions and answers so they appear to address issues but dont..

All his refutations are in themself refutable.

He's a con artist.

Im sure all the pro-fed trolls here will hop on this guy as showing how helpful the federal reserve is to America.

What a crock of bullshit.

[Chester Copperpot]

"nearly all the interest the Federal Reserve collects on government bonds is rebated to the Treasury each year, so the government does not pay any net interest to the Fed"

can anyone debunk this?

Thats not even the main issue.. The issue is seignorage.

[Terces]

Would like to see these supposed facts refuted line-by-line.

[moostraks]

I did a research paper on the Fed's origins. This "myth" is sadly true. Google "Nelson W. Aldrich".

Yep...the reason they can get away per se with this myth is that the Aldrich Plan was the predecessor, so not the actual Federal Reserve Act. Cute play on semantics.

[emazur]

Yep...the reason they can get away per se with this myth is that the Aldrich Plan was the predecessor, so not the actual Federal Reserve Act. Cute play on semantics.

Well we can throw back in their faces that an article on the Minneapolis Fed's homepage attributes the Federal Reserve act to the Aldrich Plan (and surprisingly they also discuss the Jekyll Island meeting of 1910):

One evening in early November 1910, Warburg and a small party of men from New York quietly boarded Sen. Aldrich's private railway car, ostensibly for a trip south to an exclusive hunting club on an island off the coast of Georgia.

In addition to Warburg and Aldrich, the others, all highly regarded in the New York banking community, were: Frank Vanderlip, president of National City Bank; Harry P. Davison, a J.P. Morgan partner; Benjamin Strong, vice president of Banker's Trust Co.; and A. Piatt Andrew, former secretary of the National Monetary Commission and now assistant secretary of the Treasury. The real purpose of this historic "duck hunt" was to formulate a plan for US banking and currency reform that Aldrich could present to Congress.... President Woodrow Wilson believed that the Aldrich Plan was "60-70 percent correct." As a result, the plan became the basis for constructing the Federal Reserve bill, which began to take shape in Congress with the presentation of a bill proposed by Sen. Robert Latham Owen in May 1913. http://www.minneapolisfed.org/publications_papers/pub_display.cfm?id=3815
So dude's statement that "The Aldrich Plan which the secret meeting produced was even defeated in the House, so even if the Jekyll Island affair was a genuine conspiracy, it clearly failed." is a FAIL.
Furthermore he states "Conspiracy theorists have long viewed the Federal Reserve Act as a means of giving control of the banking system to the money trusts, when in reality the intent and effect was to wrestle control away from them."
while ignores this quote:
"The results of the conference were entirely confidential. Even the fact there had been a meeting was not permitted to become public. Though eighteen years have gone by, I do not feel free to give a description of this most interesting conference concerning which Senator Aldrich pledged all participants to secrecy"
- The Federal Reserve System, Its Origin and Growth. 1930
Paul Warburg (parter in Kuhn, Loeb & Company, a representative of the Rothschild banking dynasty and brother of Max Warburg who was head of the Warburg banking consortium)
and these statements don't exactly help his argument:
speaking to the American Bankers Association about the Federal Reserve Act in late August 1913:
“The measure recognizes and adopts the principles of a central bank. Indeed, if it works out as the sponsors of the law hope, it makes incorporated banks together joint owners of a central dominating power.”
-A. Barton Hepburn, former president of Chase National Bank, former Comptroller of the Currency
On the meeting at Jekyll Island in 1910 to form the Federal Reserve:
"If it were to be exposed publicly that our particular group had got together and written a banking bill, that bill would have no chance whatever of passage by Congress"
- Saturday Evening Post, Feb. 9, 1935
Frank Vanderlip (president of the National City Bank of New York, representing William Rockefeller)

[Ninja Homer]

It is no conspiracy that the dollar lost 95+% of its value since 1913, while gaining a lot of value in the 80 years before that.

It is no conspiracy that the Federal Reserve causes the boom and bust cycles, and its attempt to centrally plan our interest rates and money supply caused this devastating recession.

It is also no conspiracy that whenever the Fed prints money, the politically well connected are the first to receive it, and working class people suffer the most from the inflation because prices rise before they get a raise. So in the grand scheme of things, the Fed redistributes wealth from the poor and middle class to the politically well connected.

I'd disagree... they aren't conspiracy theories, but they are proven conspiracies.

Conspiracy isn't a dirty word (at least it wasn't originally), it just means multiple people conspired to do something.

[john_anderson_ii]

Conspiracy isn't a dirty word (at least it wasn't originally), it just means multiple people conspired to do something.

Well put. All one has to do in order to showcase what conspiracy is, and it what it's legally defined as is google "convicted of conspiracy 2009".

[Bradley in DC]

well for one:
"Fact: Independent accounting firms conduct full financial audits of the Federal Reserve banks and the Board of Governors every year. The Fed is also subject to certain types of audits from the Government Accounting Office."

They have never had a full audit. they audits they do now are very limited.

Zippy is right.

You misstate the fact by taking out the qualifier.

[towlie]

Facts: The banking system is indeed able to create money with a mere computer keystroke. However, a bank’s ability to create money is tied directly to the amount of reserves customers have deposited there. A bank must pay a competitive interest rate on those deposits to keep them from leaving to other banks. This interest expense alone is a substantial portion of a bank’s operating costs and is de facto proof a bank cannot costlessly create money.


Yes because 1% (which is what my savings is right now but really, 3-5% is no better)is a very competitive rate of return for granting a bank the privilege of loaning 9 dollars off your 1 dollar deposit while paying you, the depositor only 1 CENT interest. HMMMM.............. banks pay out a penny and take in $9 they created off a dollar. But all this is moot for me to say since the banks really do not have to be competitive, seeing as how if they're not and they fail they will just be bailed out.


Fact: The term ‘lawful money’ does not refer to gold or silver coin, but to types of money which the government would permit banks to use when tabulating their reserves. These types of money included, but were not limited to, gold and silver coin.

Negating facts:
If gold and silver coin are included, then they are referred to. 'Lawful money' has never been properly defined by Congress. Congress has, in fact, deemed Federal Reserve Notes as separate and thus NOT INCLUDED in the undefined category of 'lawful money' because 12 USC 411, which is applicable right now, states that they (FRNs) are redeemable in lawful money. Something cannot be what it is redeemable for because the redemption (debt of FRNs) would be canceled out, and that's just bad for business:p Lawful means pertaining to law and the highest laws of the land are the national and state constitutions. This is why our 'money' is being used for things outside the constitutional scopes. Legal means pertaining to Statutes and thus, legalities reside outside the constitution. Failure to differentiate between a Law and a Statute is gross negligence, the common law equivalent of fraud. Fraud by public officials who swore an oath to uphold the Law, is Treasonous, especially those in the branch which are obligated to be completely responsible and held accountable for monetary value and currency production.

Fed Founder, Paul M. Warburg defined 'lawful money' as "gold dollars, silver dollars (not silver certificates), and Greenbacks". Greenbacks are US notes and not Fed notes which is why US notes are not payable for interest on the public debt, and Fed notes are. Reason being is that 'lawful money' is what's on deposit at the Fed and those allow them to loan out FRNs........lawful money was used as collateral or consideration to incur the debt. The debt is the FRNs.


Here is a big digital middle finger to Edward Flaherty from a fellow and native South Carolinian.