Wednesday, April 13, 2011

Was the Federal Reserve Act a Conspiracy? (No)

We've been hearing for decades about how the Federal Reserve Act of 1913 was somehow passed in "secret session," with only a few Senators voting on the bill on December 23, 1913 as the culmination of a grand conspiracy against the American people. That being the case, why are we demonstrating on Friday, April 15, 2011 outside the Federal Reserve building in Washington, DC to reform the Federal Reserve? Why not just shut it down, and let the government take over control of money and credit?

First of all, do you really want the government in charge of money and credit, seeing how well it's done with the economy? Be honest, now . . . is that really what you want?

In any event, the claim that the Federal Reserve Act was passed in secret is untrue. Financial reform was a matter of widespread public concern and a focus of both progressives and conservatives at the time. As one authority commented, "No objective stood higher on the Democratic reform schedule than banking and currency reform. In fact, there was by the beginning of 1913 complete agreement among informed circles that the most pressing economic need of the time was a fundamental reorganization of the nation's banking and money system." (Arthur S. Link, Woodrow Wilson and the Progressive Era. New York: Harper and Row, Publishers, 1954, 43.)

As a footnote to the preceding statement commented, Carter Glass of Virginia received "literally thousands of letters" from December 1912, to February 1913, begging Glass and his House committee to take swift and effective action to clean up the mess left by the Panic of 1893 and made worse by the Panic of 1907. (Ibid., 43-44.) Glass and Woodrow Wilson discussed a plan to counter the Aldrich bill even before Wilson's inauguration. (Ibid., 46.) The House of Representatives debated the bill for months before voting on the measure on September 18 and passing it on to the Senate. (Ibid., 47-50) The fight in the Senate was even more intense, as the conservative senators heaped abuse on the bill and attacked it endlessly:

With the compromises that had to be made to pass the House, bankers, business leaders and spokesmen in Congress had a field day. They denounced the bill as socialistic, theoretical, vicious, as the "preposterous offering of ignorance and unreason." The American Bankers association severely criticized the bill. . . . Surprisingly, even "liberal" bankers opposed public control of the Reserve. (Ibid., 50-51)

Hearings in the Senate lasted from September 1, 1913 to October 25, 1913. Endless lines of witnesses streamed in and out of the Capitol to testify before the committee chaired by Senator Robert Latham Owen of Oklahoma. Robert Owen, although a Senator from Oklahoma, was born in Lynchburg, Virginia in 1856, as was Carter Glass in 1858, who spearheaded the drive to get the Federal Reserve Act through the House. The record of the testimony covers more than 3,000 pages in three volumes dealing with the Banking and Currency Hearings.

The passage of the Federal Reserve Act was not done in secret, nor was it passed with just a few Senators or Congressmen present. Nor was it blind chance, luck, or a conspiracy, conservative or otherwise. As the New York Times commented more than a decade after the event in February 1924, "It has been the habit of our people to speak of the enactment of the Federal Reserve law in December, 1913, as a piece of good luck for the country. 'Luck' it certainly was, when considered in the light of the possibility that without it the United States might have been swept along with Europe into depreciated paper money." (Ray Baker, Woodrow Wilson, Life and Letters, Vol. III. New York: Charles Scribner's Sons, 1946, 201.) As one historian concluded,

The creation of the Federal Reserve System was the crowning achievement of the first Wilson administration. The system was not created to prevent industrial depressions or banish poverty. The framers of the act hoped merely that it would provide the country with an absolutely sound yet elastic currency, establish machinery for mobilizing the entire banking reserves of the country in times of financial stringency, prevent the concentration of reserves and credit in New York City, and, finally, preserve private enterprise in banking on the local level while at the same time imposing a degree of public regulation. On the whole, they succeeded remarkably well. (Link, Woodrow Wilson and the Progressive Era, op. cit., 53.)

That’s why, if you’re really interested in doing something constructive about the Federal Reserve, come down to the Federal Reserve building in Washington, DC, this Friday, April 15, 2011. The rally starts on the front sidewalk of the White House (1600 Pennsylvania Avenue) at 10:15 am, then there is a walk to the Federal Reserve at 11:00 and a regrouping at the Federal Reserve at noon, with the festivities going to 1:30 pm.



Anonymous said...

Absolute power corrupts absolute and this cartel of bankers which privately OWN and run the Federal Reserve has been corrupted beyond redemption. It is time to DISMANTLE the Federal Reserve and strip them of all their invasive powers and return this countries assets (including our gold which no longer sits in any U.S. Treasury) back to "We The People".

Michael D. Greaney said...

This comment, with its egregious misunderstanding of the posting, demonstrates the advisability of studying Mortimer Adler's "How to Read a Book" and an explanation of property and banking theory before pontificating about money and credit. A reading of the actual text of the Constitution is also in order, as is Alexander Hamilton's opinion as to the constitutionality of the Bank of the United States.

Max Weismann said...

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