Federal Reserve: Constitutional? Democratic?

I was talking to someone about the John Birch Society. I was mentioning how, having come of age in the 1990s when the right-wing was on the rise, I inherited some of the Bircher paranoia toward power. Besides fear of flouride in the water, the other notion that was implanted in my young mind was the criticisms of the privately owned Federal Reserve banks.
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Despite my liberalism, in some ways I might make a better paranoid right-winger than some conservatives (although ultimately my liberal faith in humanity and reason usually wins out). I dismiss the craziest paranoid conspiracy theories proposed by right-wingers, but some of the right-wingers’ concerns are worthy of consideration. I (and many other liberals) consider the Federal Reserve to be one of these worthy concerns.
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There are issues about the constitutional and democratic validity of the Federal Reserve. Furthermore, more central to the Bircher’s fears, there is plenty of evidence that the Federal Reserve member banks are privately owned:
1. United States
There are no sharp criteria for determining whether an entity is a federal agency within meaning of the Federal Tort Claims Act, but critical factor is existence of federal government control over “detailed physical performance” and “day to day operation” of an entity. . .
2. United States
Federal reserve banks are not federal instrumentalities for purposes of a Federal Tort Claims Act, but are independent, privately owned and locally controlled corporations in light of fact that direct supervision and control of each bank is exercised by board of directors, federal reserve banks, though heavily regulated, are locally controlled by their member banks, banks are listed neither as “wholly owned” government corporations nor as “mixed ownership” corporations; federal reserve banks receive no appropriated funds from Congress and the banks are empowered to sue and be sued in their own names. . .
3. United States
Under the Federal Tort Claims Act, federal liability is narrowly based on traditional agency principles and does not necessarily lie when a tortfeasor simply works for an entity, like the Reserve Bank, which performs important activities for the government. . .
4. Taxation
The Reserve Banks are deemed to be federal instrumentalities for purposes of immunity from state taxation.
5. States Taxation
Tests for determining whether an entity is federal instrumentality for purposes of protection from state or local action or taxation, is very broad: whether entity performs important governmental function.
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President Wilson admitted that he had made a mistake in helping to create the Federal Reserve and that it had destroyed our democracy (The New Freedom: A Call For the Emancipation of the Generous Energies of a People, chapter 8 Monopoly, or Opportunity?)
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.
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Let me issue and control a nation’s money, and I care not who writes its laws.
~ Mayer Amschel Bauer Rothschild (1773-1855), London financier, one of the founders of the international Rothschild banking dynasty, 1838.
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I would actually argue that controlling the stories, mythologies, and political narratives of a society is a greater power. But who controls the banking system controls the money supply. Who controls the money supply controls the economy. Who controls the economy controls who owns the media. And who owns the media controls the stories, mythologies, and political narratives of a society. So, sadly, it does go all the way back to the bankers.
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Whether or not one believes the Federal Reserve is essentially privately owned or controlled, it can’t be denied that it is one of the most (if not the most) powerful institutions in the US (and maybe the world) and one of the least (if not the least) democratic institution in the US. Many of the problematic economic decisions in recent history didn’t come from democratically elected leaders (even making the large assumption that democracy is still functioning). The Federal Reserve has made many decisions about our economy and there has been very little oversight even by Congress which theoretically has oversight. And, whether or not one favors democracy, the Federal Reserve doesn’t even make sense according to the small ‘r’ republican notion of a government that is free of both the influence of monarchy and private economic interests.
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There is nothing representative about the Federal Reserve. I see all of our major problems going to this rot within the highest echelons of our political and economic system. This rot isn’t limited to the Federal Reserve, but the Federal Reserve (along with the Military-Industrial Complex) is one of the institutions that represents this rot. This is concentrated power at its worse, meaning undemocratic, unrepresentative and largely unregulated. It’s a power unto itself beyond external control.
It (Central Bank ) gives the National Bank almost complete control of national finance. The few who understand the system will either be so interested in its profits, or so dependent on its favours, that there will be no opposition from that class… The great body of the people, mentally incapable of comprehending, will bear its burden without complaint, and perhaps without even suspecting that the system is inimical (contrary) to their interests.
– Rothschild Brothers of London writing to their associates in New York, June 25, 1863.
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There is even question of whether the Federal Reserve is constitutional.
Article 1, Section 8 states that Congress shall have the power to coin (create) money and regulate the value thereof. In 1935, the US Supreme Court ruled the Congress cannot constitutionally delegate its power to another group or body.
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It depends on the meaning of delegating and what can be delegated. Jefferson thought a central bank was unconstitutional by definition as it isn’t enumerated in the constitution. But there is the further question of ownership. The 12 Federal Reserve banks are privately owned, but defenders of the Federal Reserve argue that nonetheless these privately owned banks are under the direct control of the President and Congress along with those in the Federal Reserve who are appointed through the political process.

So, it becomes an issue of how much power and influence the member banks have over the Federal Reserve vs how much power and influence the Federal Reserve has over the member banks. And it becomes an issue of which specific private interests own, control or otherwise has influence over the member banks. The fact that the Federal Reserve is so secretive makes these issues unclear. Also, the fact that the Federal Reserve bailed out foreign banks makes this lack of clarity downright murky, to say the least.

It’s impossible for the average person (or maybe even the average politician) to know what the Federal Reserve is and how it operates. Knowledge is power and ignorance is powerlessness. Secrecy is the province of authoritarian power structures which is antithetical to democracy.

Is a central bank constitutional? Second, even if a central bank is constitutional, is it constitutional for Congress to delegate its power to the Federal Reserve which includes privately owned banks? There is neither a clear and unquestionable constitutional validity to the general principle of a central bank nor specifically to the Federal Reserve. Then again, there isn’t a clear and unquestionable constitutional validity to most of what the government does. The constitution was vague and limited in what it spoke about.

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Eisenhower (who the Birchers called a commie) wrote,
You keep harping on the Constitution; I should like to point out that the meaning of the Constitution is what the Supreme Court says it is. Consequently no powers are exercised by the Federal government except where such exercise is approved by the Supreme Court (lawyers) of the land.
I admit that the Supreme Court has in the past made certain decisions in this general field that have been astonishing to me. A recent case in point was the decision in the Phillips case. Others, and older ones, involved “interstate commerce.” But until some future Supreme Court decision denies the right and responsibility of the Federal government to do certain things, you cannot possibly remove them from the political activities of the Federal government.
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It’s interesting to hear Eisenhower’s perspective. He was an old school conservative… which means he was more liberal than most Democratic politicians today. Or, to put it another way, Eisenhower was a politician that is rarely seen today that genuinely believed in a government that served the people (“But to attain any success it is quite clear that the Federal government cannot avoid or escape responsibilities which the mass of the people firmly believe should be undertaken by it.”). Unlike cynical right-wingers, Eisenhower believed that federal government was morally justified.
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What is interesting about Eisenhower is that one could simultaneously say he was one of the most principled presidents of the 20th century and also a hypocrite. He defended democracy while criticizing the Military-Industrial Complex that undermines democracy. On the other hand, he used the CIA to overthrow the democratically-elected government of Iran and used the FBI to practice COINTELPRO on the American public. It’s sad that such a person represents the height of principled behavior among modern US presidents.
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Ignoring the hypocrisy, though, I find myself drawn toward agreement with his ‘liberal’ views of the role of government and the constitution. I differ from right-wingers in that I’m not necessarily against a central bank. It depends (as a liberal, it always comes down to “It depends”). For a smaller country with a simpler agrarian economy (such as the early US), a central bank was probably dangerous and unnecessary. However, for a larger country with a complex industrial/technological economy, a central bank may be a necessary risk. That said: Secretiveness is morally wrong in a democracy and must be fought against at every turn. And it’s probably unwise for privately owned banks to be involved in the central bank in any direct manner.
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The challenge is liberal voices such as mine are almost entirely unheard in the mainstream. The debate is made into a black/white issue of being entirely for or entirely against the Federal Reserve. Intelligent and informed nuance is lost in a battle of ideologies. As such, criticism of the Federal Reserve just gets dismissed as another right-wing conspiracy theory.

The Truth of Capitalism

When was the Golden Age of the Free Market?  It never existed. 

The rich and powerful capitalists have always been trying to control the government and manipulate the markets… and they always will.  The only place a free market might exist is in the village of some isolated tribe in the Amazon, but don’t worry the capitalists will figure out a way to find and destroy that village.  No free man will be left alive. 

Don’t worry about the government.  The president, the congress, the senate… they’re all puppets.  And the few who haven’t entirely sold their souls are powerless to do anything to change the system.

You could attempt a revolution if you like.  But if you do, the Military-Industrial Complex and the police state will destroy you and everything you love.  Join the Tea Party if it makes you happy.  But know the FBI is keeping a record on every protester. 

When one party is in power, vote for the other party… repeat again and again… nothing ever changes.

“When the oppressors give me two choices, I always take the third.”
-Meir Berliner (died fighting the SS at Treblinka), as quoted in A Language Older Than Words by Derrick Jensen

Quotes About The Federal Reserve And Central Banking

“Most Americans have no real understanding of the operation of the international money lenders. The accounts of the Federal Reserve System have never been audited. It operates outside the control of Congress and manipulates the credit of the United States.”
-Sen. Barry Goldwater

“It is well that the people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.”
-Henry Ford

“The regional Federal Reserve banks are not government agencies. …but are independent, privately owned and locally controlled corporations.”
-Lewis vs. United States, 680 F. 2d 1239 9th Circuit 1982

“The Federal Reserve banks are one of the most corrupt institutions the world has ever seen. There is not a man within the sound of my voice who does not know that this nation is run by the International bankers.”
-Congressman Louis T. McFadden

“The real truth of the matter is, as you and I know, that a financial element in the large centers has owned the government of the U.S. since the days of Andrew Jackson.”
-Franklin Delano Roosevelt

“As soon as Mr. Roosevelt took office, the Federal Reserve began to buy government securities at the rate of ten million dollars a week for 10 weeks, and created one hundred million dollars in new [checkbook] currency, which alleviated the critical famine of money and credit, and the factories started hiring people again.”
-Eustace Mullins

“This [Federal Reserve Act] establishes the most gigantic trust on earth. When the President [Wilson} signs this bill, the invisible government of the monetary power will be legalized….the worst legislative crime of the ages is perpetrated by this banking and currency bill.”
-Charles A. Lindbergh, Sr. , 1913

“When you or I write a check there must be sufficient funds in our account to cover the check, but when the Federal Reserve writes a check there is no bank deposit on which that check is drawn. When the Federal Reserve writes a check, it is creating money.”
-Putting it simply, Boston Federal Reserve Bank

“We have, in this country, one of the most corrupt institutions the world has ever known. I refer to the Federal Reserve Board. This evil institution has impoverished the people of the United States and has practically bankrupted our government. It has done this through the corrupt practices of the moneyed vultures who control it.”
-Congressman Louis T. McFadden in 1932

“The few who understand the system, will either be so interested from it’s profits or so dependent on it’s favors, that there will be no opposition from that class.”
-Rothschild Brothers of London, 1863

“While boasting of our noble deeds were careful to conceal the ugly fact that by an iniquitous money system we have nationalized a system of oppression which, though more refined, is not less cruel than the old system of chattel slavery.”
-Horace Greeley

“The Federal Reserve bank buys government bonds without one penny…”
-Congressman Wright Patman, Congressional Record, Sept 30, 1941

“…the increase in the assets of the Federal Reserve banks from 143 million dollars in 1913 to 45 billion dollars in 1949 went directly to the private stockholders of the [federal reserve] banks.”
-Eustace Mullins

“The financial system has been turned over to the Federal Reserve Board. That Board administers the finance system by authority of a purely profiteering group. The system is Private, conducted for the sole purpose of obtaining the greatest possible profits from the use of other people’s money”
-Charles A. Lindbergh Sr., 1923

“Bankers own the earth. Take it away from them, but leave them the power to create money and control credit, and with a flick of a pen they will create enough to buy it back.”
-Sir Josiah Stamp, former President, Bank of England

“All the perplexities, confusion and distress in America arise, not from defects in their Constitution or Confederation, not from want of honor or virtue, so much as from the downright ignorance of the nature of coin, credit and circulation.”
-John Adams

“Whoever controls the volume of money in any country is absolute master of all industry and commerce.”
-James A. Garfield, President of the United States

“A great industrial nation is controlled by it’s system of credit. Our system of credit is concentrated 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 world–no longer a government of free opinion, no longer a government by conviction and vote of the majority, but a government by the opinion and duress of small groups of dominant men.”
-President Woodrow Wilson

“History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by controlling money and it’s issuance.”
-James Madison

“I believe that banking institutions are more dangerous to our liberties than standing armies. Already they have raised up a monied aristocracy that has set the government at defiance. The issuing power (of money) should be taken away from the banks and restored to the people to whom it properly belongs.”
-Thomas Jefferson

“The money powers prey upon the nation in times of peace and conspire against it in times of adversity. It is more despotic than a monarchy, more insolent than autocracy, and more selfish than bureaucracy. It denounces as public enemies all who question its methods or throw light upon its crimes. I have two great enemies, the Southern Army in front of me and the bankers in the rear. Of the two, the one at my rear is my greatest foe.”
-Abraham Lincoln

“Give me control of a nation’s money and I care not who makes it’s laws”
-Mayer Amschel Bauer Rothschild