Bernie Sanders the FRAUD Hypocrite

[Ender]

This is exactly what we are saying that ender seems unable to understand. In a free market, depositors at a FRB would be consciously taking a risk with their money accepting the very real possibility of a bust. This would be separate from warehousing where the bank is contracted to eliminate risk.

I understand very well- better than you.

In a free society, can you sell your house to 10 different people and keep the profits? Who owns the house? This would be illegal.

An excellent video with Salmon Khan on FRB
ttp://www.infowars.com/fractional-reserve-banking-explained/

[Son_of_Liberty90]

Isn't fractional reserve banking part of the monster we are against in central banks, are there people who like money system multiplication? Always thought this video explained it well:

Also, who exactly is this money owed to? According to this chart, the government creates the IOUs.

So it prints its own currency. Why cant it cancel its own debt?

[url]http://fiatplanetcouk.fatcow.com/fia...ry-of-mankind/[/quote]

[Gumba of Liberty]

This is exactly what we are saying that ender seems unable to understand. In a free market, depositors at a FRB would be consciously taking a risk with their money accepting the very real possibility of a bust. This would be separate from warehousing where the bank is contracted to eliminate risk.

Not exactly. In a free market, individuals are free to gamble and speculate to their hearts desire with their own money under full disclosure. What you cannot do is simultaneously gamble your money and request to have access to your money on demand. I cannot lend my brother a cheeseburger and simultaneously control said cheeseburger at the same time. I might have a cheeseburger coming to me (once my brother pays me back) but once I lend the original, I no longer have a claim to the burger until I am paid back (hopefully). This is the nature of lending. If a bank can lend your money out and allow you to access your money at the same time there is fraud being perpetrated. This is the problem and under the free market system of natural law it would be illegal.

[Son_of_Liberty90]

Also, Maloney cited the FED website that 6% is owned by stockholders.

Well, by that logic, wouldn't the rest be owned by the Treasury? 94% Maloney harped on the fact that FED is a private bank, but 6% does not sound completely private to me.

http://<a href="https://www.federalr...ction7.htm</a>

[Son_of_Liberty90]

Also, Maloney cited the FED website that 6% is owned by stockholders.

Well, by that logic, wouldn't the rest be owned by the Treasury? 94% Maloney harped on the fact that FED is a private bank, 6%, but then he goes back into fractional reserve banking. It seemed like a red herring in the video.

https://www.federalreserve.gov/aboutthefed/section7.htm

Federal Reserve Act


Section 7. Division of Earnings

(a) Dividends And Surplus Funds Of Reserve Banks.

1. Stockholder Dividends.
   
   • In General. After all necessary expenses of a Federal reserve bank have been paid or provided for, the stockholders of the bank shall be entitled to receive an annual dividend of 6 percent on paid-in capital stock.
   • Dividend Cumulative. The entitlement to dividends under subparagraph (A) shall be cumulative.
   
   
2. Deposit Of Net Earnings In Surplus Fund. That portion of net earnings of each Federal reserve bank which remains after dividend claims under subparagraph (1)(A) have been fully met shall be deposited in the surplus fund of the bank.

(b) Transfer For Fiscal Year 2000.

1. In General. The Federal reserve banks shall transfer from the surplus funds of such banks to the Board of Governors of the Federal Reserve System for transfer to the Secretary of the Treasury for deposit in the general fund of the Treasury, a total amount of $3,752,000,000 in fiscal year 2000.
2. Allocated By Fed. Of the total amount required to be paid by the Federal reserve banks under paragraph (1) for fiscal year 2000, the Board shall determine the amount each such bank shall pay in such fiscal year.
3. Replenishment Of Surplus Fund Prohibited. During fiscal year 2000, no Federal reserve bank may replenish such bank's surplus fund by the amount of any transfer by such bank under paragraph (1).

[12 USC 289. As amended by acts of March 3, 1919 (40 Stat. 1314); June 16, 1933 (48 Stat. 163); Aug. 10, 1993 (107 Stat. 337); Sept. 23, 1994 (108 Stat. 2291); and Nov. 29, 1999 (113 Stat. 1501A-304), which added this subsection (b) but failed to redesignate existing subsection (b) (12 USC 290).]
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(b) Use of Earnings Transferred To The Treasury. The net earnings derived by the United States from Federal reserve banks shall, in the discretion of the Secretary, be used to supplement the gold reserve held against outstanding United States notes, or shall be applied to the reduction of the outstanding bonded indebtedness of the United States under regulations to be prescribed by the Secretary of the Treasury. Should a Federal reserve bank be dissolved or go into liquidation, any surplus remaining, after the payment of all debts, dividend requirements as hereinbefore provided, and the par value of the stock, shall be paid to and become the property of the United States and shall be similarly applied.
[12 USC 290. Part of original Federal Reserve Act; not amended. Designated subsection (b) by act of Aug. 10, 1993 (107 Stat. 337).]
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(c) Exemption From Taxation. Federal reserve banks, including the capital stock and surplus therein, and the income derived therefrom shall be exempt from Federal, State, and local taxation, except taxes upon real estate.
[12 USC 531. Part of original Federal Reserve Act. Designated subsection (c) by act of Aug. 10, 1993 (107 Stat. 338).]

[Son_of_Liberty90]

Maybe this answers my question:

The Fed is exactly what it needs to be to avoid anyone touching it: a public-private hybrid. Whenever it would be subject to oversight or FOIA or auditing as a government agency, it is considered private. Whenever it would be subject to scrutiny and regulation as a private company, it is considered public.
Thus "the Fed is a private company" is a red herring. It leads nowhere since it an be easily debunked. It is the bastard child of the government and the banks, able to avoid the weaknesses of being wholly one or the other. The government loves it because it lets them spend more money, and bankers love it because it profits them tremendously. It is the very organizational distillation of the old maxim that "power corrupts."

https://www.reddit.com/r/Bitcoin/com...ivately_owned/

[Son_of_Liberty90]

https://mises.org/library/independence-fed

The Independence of the Fed?

• 

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Tags The FedU.S. HistoryInterventionismPolitical Theory
03/19/2010Sarel Oberholster
There is a thesis that the banks are in control of the Fed and as a result have gained control over the issuance of the currency of the United States. This thesis is based on the fact that the shares of the Federal Reserve Bank are held by these private banks. Does that mean that the private banks own the Fed?
The short answer is yes, but it is a hollow ownership with very restricted rights. This ownership basically exists to give credence to the claim that the fed is independent. It is appropriately described as follows in the Fed's own publication "Federal Reserve System Purposes & Functions":

The holding of this stock, however, does not carry with it the control and financial interest conveyed to holders of common stock in for-profit organizations. It is merely a legal obligation of Federal Reserve membership, and the stock may not be sold or pledged as collateral for loans. Member banks receive a 6 percent dividend annually on their stock. (p. 12)

This is exactly the manner in which Special Purpose Vehicles (or Special Purpose Entities) are created in the corporate world. There is usually a promoter who does not wish to be seen to own an entity but who wishes to derive some benefit from the existence of such an entity. Usually, overt ownership would adversely impact the presentation of the promoter's financial reporting.

The authorities and regulators, including the Fed, are very aware of these Special Purpose structures, as is the accounting profession. Rules have been devised and implemented to assess any such arrangement in order to establish its true nature. It is therefore appropriate to assess the Fed's independence — or, alternatively, interdependence — according to the very rules that it uses to assess Special Purpose Entities. First, let's draw the simple ownership structure.

Anyone with a rudimentary knowledge of accounting principles would know that ownership of an entity without control over that entity requires further investigation. Consolidation of a group of companies can become complex when ownership and control are split. The GAAP (Generally Accepted Accounting Principles) method in this case disregards ownership and focuses on control.
For example, a right to appoint the majority of the board of directors even in the absence of ownership would trigger a consolidation of that entity. Thus the controller and the entity would be seen as part of a group and collectively as a single interdependent consolidated entity. It follows that the simple structure of the Federal Reserve Banks drawn above is a split structure, where "ownership" is of limited significance and "control" must be established. Control will tell us whether the entities are independent or interdependent.

All regulation targets "control," not just the legal form of ownership. Accounting principles of consolidation have evolved from Special Purpose Vehicles, to Special Purpose Entities, and very lately — with the revision in June 2009 for implementation in January 2010 of Financial Accounting Standard 46(R) ("FIN 46(R)") — they have evolved into the concept of a "Variable Interest Entity."

In effect, the test of whether one organization is a "Variable Interest Entity" controlled by another organization is similar to a DNA test to determine whether two people are members of the same family. FIN 46 (R) defines a "variable interest" as follows:

The enterprise with a variable interest or interests that provide the enterprise with a controlling financial interest in a variable interest entity will have both of the following characteristics:
a. The power to direct the activities of a variable interest entity that most significantly impact the entity's economic performance
b. The obligation to absorb losses of the entity that could potentially be significant to the variable interest entity or the right to receive benefits from the entity that could potentially be significant to the variable interest entity. (par. 1A)[1]

The first test is to check for "the power to direct the activities." Who exactly holds that power?
Here we turn to the Federal Reserve Act, which instructs the Regional Federal Reserve Banks to each elect their own board of directors, of which the chairman and vice chairman of the regional board will be appointed by the Board of Governors of the Federal Reserve System. The regional boards must have nine directors in three classes of three each (A, B and C directors): three A directors chosen by the stockholders; three B directors to represent the "public"; and three C directors to be appointed by the Board of Governors of the Federal Reserve System. The Board of Governors of the Federal Reserve System will appoint the chairman and vice chairman from the ranks of the three C directors.

The Board of Governors of the Federal Reserve System seems to have powers that could indicate "control," including the appointment of the power positions of chairman and vice chairman. However, we must also ask whether the regional boards have the independent powers normally associated with ownership and control, or if their powers are restricted and controlled in any manner.

The answer again lies in the Federal Reserve Act:

Said board of directors shall administer the affairs of said bank fairly and impartially and without discrimination in favor of or against any member bank or banks and may, subject to the provisions of law and the orders of the Board of Governors of the Federal Reserve System, extend to each member bank such discounts, advancements, and accommodations as may be safely and reasonably made with due regard for the claims and demands of other member banks, the maintenance of sound credit conditions, and the accommodation of commerce, industry, and agriculture. The Board of Governors of the Federal Reserve System may prescribe regulations further defining within the limitations of this Act the conditions under which discounts, advancements, and the accommodations may be extended to member banks. (section 4, par. 8)

The regional boards are limited in their ability to perform the primary functions of the Regional Federal Reserve Bank by the terms of the act and by the control of the Board of Governors of the Federal Reserve System. It is clear from the Federal Reserve Act that control does not rest in the Regional Federal Reserve Boards, nor are they independent, but they take instruction and are controlled by the Board of Governors of the Federal Reserve System.
It is now appropriate to update the simplified structure drawn above, in order to add these two steps of control.





The question of who has control is not yet resolved; the nature of the Board of Governors of the Federal Reserve System must be investigated next. Is the Board of Governors of the Federal Reserve System an independent body or beholden to another entity?
The "Purposes & Functions" document describes the nature of the Board of Governors of the Federal Reserve System:

The Board of Governors of the Federal Reserve System is a federal government agency. The Board is composed of seven members, who are appointed by the President of the United States and confirmed by the U.S. Senate.
The Chairman and the Vice Chairman of the Board are also appointed by the President and confirmed by the Senate. The nominees to these posts must already be members of the Board or must be simultaneously appointed to the Board. (p. 4)

The Board of Governors of the Federal Reserve System is a federal government agency. The power to appoint its members, chairman, and vice chairman is vested in the president of the United States, with the Senate having a veto power over any appointment.
The first requirement for a "variable interest," "the power to direct the activities" is fulfilled: the federal government at the presidential level holds "the power to direct activities."
The final version of the structure of control is as follows:



The next requirement that must be met for a "variable interest" is either an "obligation to absorb losses" or a "right to receive benefits."
I would argue that the Fed's right to create currency, together with the vested interests of federal government, are more than sufficient to infer an "obligation to absorb losses." The Federal Reserve Act adds a complication to this argument by holding the shareholders responsible to the extent of their stockholding for the liabilities of the Regional Federal Reserve Banks. However, the "obligation to absorb losses" is not a requirement that needs to be met so long as the alternative, the "right to receive benefits" requirement, is met. Since the obligation is not clear cut, it is better to concentrate on the right. Note that neither the obligation nor the right need to be absolute.
Again we can turn to the two sources, the Federal Reserve Act and the Fed publication "Federal Reserve System Purposes & Functions" for guidance.
Federal Reserve Act:

Dividends and Surplus Fund of Reserve Banks

(a)

1. 
   
   1. After all necessary expenses of a Federal reserve bank have been paid or provided for, the stockholders of the bank shall be entitled to receive an annual dividend of 6 percent on paid-in capital stock.
   2. The entitlement to dividends under subparagraph (A) shall be cumulative.
   
   
2. That portion of net earnings of each Federal reserve bank which remains after dividend claims under subparagraph (1)(A) have been fully met shall be deposited in the surplus fund of the bank.

(b) Transfer for fiscal year 2000.

1. The Federal reserve banks shall transfer from the surplus funds of such banks to the Board of Governors of the Federal Reserve System for transfer to the Secretary of the Treasury for deposit in the general fund of the Treasury, a total amount of $3,752,000,000 in fiscal year 2000.
2. Of the total amount required to be paid by the Federal reserve banks under paragraph (1) for fiscal year 2000, the Board shall determine the amount each such bank shall pay in such fiscal year.
3. During fiscal year 2000, no Federal reserve bank may replenish such bank's surplus fund by the amount of any transfer by such bank under paragraph (1). (section 7)

"Federal Reserve System Purposes & Functions":

The income of the Federal Reserve System is derived primarily from the interest on U.S. government securities that it has acquired through open market operations. Other major sources of income are the interest on foreign currency investments held by the System; interest on loans to depository institutions; and fees received for services provided to depository institutions, such as check clearing, funds transfers, and automated clearinghouse operations.

After it pays its expenses, the Federal Reserve turns the rest of its earnings over to the U.S. Treasury. About 95 percent of the Reserve Banks' net earnings have been paid into the Treasury since the Federal Reserve System began operations in 1914. (Income and expenses of the Federal Reserve Banks from 1914 to the present are included in the Annual Report of the Board of Governors.) In 2003, the Federal Reserve paid approximately $22 billion to the Treasury. (p. 11)

The statement that "about 95% of the Reserve Banks' net earnings have been paid into the Treasury since the Federal Reserve System began operations in 1914" says it well enough. It is an irrefutable fact that the federal government possesses the overwhelming "right to receive benefits."

The outright, indisputable conclusion is that the Fed, when tested against GAAP as the Fed itself uses it in the Fed's assessments of those it regulates, is a Special Purpose Entity of the federal government (or, according to the latest definition, is a Variable Interest Entity of the federal government). The rules of consolidation therefore apply, and the Fed must be seen as controlled by federal government, making it indivisibly part of the federal government. The pretence of independence is no more that that, a pretence.

There is, however, no denying that the banks have tremendous vested interest in influencing the policies of the Fed, nor that the power being so narrowly vested in the president makes him a special target for influence. Still, the power to control the Fed is not in the hands of its "owners" but firmly in the hands of the federal government and the president of the United States.
Notes

[1] Financial Accounting Standards Board of the Financial Accounting Foundation; Connecticut, No 311; June 2009, Statement of Financial Accounting Standards No 167.

[afwjam]

Not exactly. In a free market, individuals are free to gamble and speculate to their hearts desire with their own money under full disclosure. What you cannot do is simultaneously gamble your money and request to have access to your money on demand. I cannot lend my brother a cheeseburger and simultaneously control said cheeseburger at the same time. I might have a cheeseburger coming to me (once my brother pays me back) but once I lend the original, I no longer have a claim to the burger until I am paid back (hopefully). This is the nature of lending. If a bank can lend your money out and allow you to access your money at the same time there is fraud being perpetrated. This is the problem and under the free market system of natural law it would be illegal.

so would insurance companies also be illegal? If not whats the difference in prunciple? In a non backed FRB it would be a very real possibility if the depositor/lender went to get their money it would not be there. If my parents have a morgage, should it then be illegal for them to lend me some money and then in turn me to a friend in need if I so desire? It seems the risk and liability are clear all the way through.

[Gumba of Liberty]

so would insurance companies also be illegal? If not whats the difference in prunciple? In a non backed FRB it would be a very real possibility if the depositor/lender went to get their money it would not be there. If my parents have a morgage, should it then be illegal for them to lend me some money and then in turn me to a friend in need if I so desire? It seems the risk and liability are clear all the way through.

The difference between FR Banking and insurance is that with insurance you cannot simultaneously claim ownership over the money you spend on your insurance payment and make the payment. When you pay for insurance you no longer have that money, you are trading it in exchange for your insurance policy (hoping that your insurance company is solvent and not defrauding you). With FR banking you are claiming the ability to control both your funds and at the same time lend your funds to other people. If this doesn't make sense to you try reading Rothbard, he explains it better.

[afwjam]

what about my loan example? as long as people are liable for their risks i see no issue. if the insurance company had to pay out to everyone at the same time, it would be the same as a FRB having every deposit/lender wanting their loan back at the same time. I think we can agree on the fed which does multiply the money supply through FRB in a run away fashion. There should not be the authority to do such things, just as there should not be the authority to prevent someone from risking their money if they choose to lend it out. as long as people are liable for their risks.

[Ender]

what about my loan example? as long as people are liable for their risks i see no issue. if the insurance company had to pay out to everyone at the same time, it would be the same as a FRB having every deposit/lender wanting their loan back at the same time. I think we can agree on the fed which does multiply the money supply through FRB in a run away fashion. There should not be the authority to do such things, just as there should not be the authority to prevent someone from risking their money if they choose to lend it out. as long as people are liable for their risks.

Insurance is also a scam.

My Grandfather always said it was a poker game- he's betting there will be no disaster in his life- the insurance co betting there will be.

[Gumba of Liberty]

what about my loan example? as long as people are liable for their risks i see no issue. if the insurance company had to pay out to everyone at the same time, it would be the same as a FRB having every deposit/lender wanting their loan back at the same time. I think we can agree on the fed which does multiply the money supply through FRB in a run away fashion. There should not be the authority to do such things, just as there should not be the authority to prevent someone from risking their money if they choose to lend it out. as long as people are liable for their risks.

Again, not exactly. Imagine if a casino did not have enough money to pay out their winners, what would happen? The winners would sue and take the assets of the casino. If the casino did not have enough assets to cover the balance then the winners would take the assets of the owners of the casino (limited-liability is fictional). The same thing would happen if an insurance company, without sufficient funding, was able to convince people into making monthly payments. In the end, the insurance company would get sued and forfeit their assets. Now, if the company put a clause into their contract that said that they would be unable to pay if fill-in-the-blank happened, fully-disclosed to the customer, then the insurance company would be in the right.

Regardless, neither example is the same as fractional-reserve banking which would be the equivalent of a casino issuing more chips than cash it has on hand or insurance companies which promise more benefits by using the money of new beneficiaries to pay old beneficiaries (Ponzi Scheme). It must be understood that fractional-reserve anything makes that institution more profitable in the short-term but more unstable in the long-term and this has devastating effects on the economy especially when money, one-half of every transaction, is the product being manipulated. If you want a stable, sustainable, free and moral civilization you must not allow businesses to claim to have more assets than they actually have. Again, Rothbard has the answer you are looking for. I appreciate the discussion though, I have not had this much fun on RPF's in a while.

[afwjam]

But aren't you forgetting all the people who borrowed the money from the bank, they have promised to pay it back and they most likely have assets of value bought with the money borrowed. Now if they deposit the money borrowed and the bank loans it out again it would seem to be creating more on the balance sheet then there are assets to back it up, but I really don't think that's what someone would borrow money for. I'm not a fan of FRB or insurance companies, casinos or socialism. But if I'm not forced to be part of it and those that do take the risk are held liable, I'm not seeing a problem with it. If a FRB had a run, I assume they would have to call in all the loans, if they could not raise the assets the bank would be delinquent and in debt to the depositors, who assuming a free market most likely signed onto the risk in contract with the hopes of getting more money back then they deposited, kinda like buying stock in a company. I also enjoy having "real" discussions here on RPF, it's a hell of a lot better then the gossiping and story telling folks seem to like around here these days.

[Gumba of Liberty]

But aren't you forgetting all the people who borrowed the money from the bank, they have promised to pay it back and they most likely have assets of value bought with the money borrowed. Now if they deposit the money borrowed and the bank loans it out again it would seem to be creating more on the balance sheet then there are assets to back it up, but I really don't think that's what someone would borrow money for. I'm not a fan of FRB or insurance companies, casinos or socialism. But if I'm not forced to be part of it and those that do take the risk are held liable, I'm not seeing a problem with it. If a FRB had a run, I assume they would have to call in all the loans, if they could not raise the assets the bank would be delinquent and in debt to the depositors, who assuming a free market most likely signed onto the risk in contract with the hopes of getting more money back then they deposited, kinda like buying stock in a company. I also enjoy having "real" discussions here on RPF, it's a hell of a lot better then the gossiping and story telling folks seem to like around here these days.

I understand your premise but here is my problem with it:

If Person A pays Person B every month in exchange for Person B providing Person A with a future service (Insurance). I see nothing wrong with that.
If Person A places a bet with Person B in exchange for the opportunity to increase the size of their holdings (Casino). I see nothing wrong with that.
If Person A trusts Person B to hold, save and allow them access on demand to their money and Person B loans Person A's money to Person C. I see a problem with that. In this situation Person A & C both claim the same asset at the same time. (FR Banking) This is an accounting trick, otherwise known as fraud and bankers should be held accountable for this manipulation.

[Ender]

I understand your premise but here is my problem with it:

If Person A pays Person B every month in exchange for Person B providing Person A with a future service (Insurance). I see nothing wrong with that.
If Person A places a bet with Person B in exchange for the opportunity to increase the size of their holdings (Casino). I see nothing wrong with that.
If Person A trusts Person B to hold, save and allow them access on demand to their money and Person B loans Person A's money to Person C. I see a problem with that. In this situation Person A & C both claim the same asset at the same time. (FR Banking) This is an accounting trick, otherwise known as fraud and bankers should be held accountable for this manipulation.

'Zactly.

[Ender]

But aren't you forgetting all the people who borrowed the money from the bank, they have promised to pay it back and they most likely have assets of value bought with the money borrowed. Now if they deposit the money borrowed and the bank loans it out again it would seem to be creating more on the balance sheet then there are assets to back it up, but I really don't think that's what someone would borrow money for. I'm not a fan of FRB or insurance companies, casinos or socialism. But if I'm not forced to be part of it and those that do take the risk are held liable, I'm not seeing a problem with it. If a FRB had a run, I assume they would have to call in all the loans, if they could not raise the assets the bank would be delinquent and in debt to the depositors, who assuming a free market most likely signed onto the risk in contract with the hopes of getting more money back then they deposited, kinda like buying stock in a company. I also enjoy having "real" discussions here on RPF, it's a hell of a lot better then the gossiping and story telling folks seem to like around here these days.

And thanks for that- very refreshing to read & partake in discussions that don't turn into name-calling crapola. I've learned a lot from real and thought-provoking POVs from others that don't necessarily jibe with mine.

[RJB]

Insurance is also a scam.

My Grandfather always said it was a poker game- he's betting there will be no disaster in his life- the insurance co betting there will be.

I see it more as the insurance company are betting that their lawyers will "prove" that your disaster is actually not a disaster that warrants you getting your money back.