The Fed Is Not "a Good Idea that Became Corrupt": It Always Was Corrupt

 The Federal Reserve has grown increasingly corrupt

• Peter Schiff and David Stockman hammer the Fed relentlessly for its cluelessness, corruption, and threat to our material and spiritual well-being
• Yet, strangely, their recommendations stop short of eradicating the cancer altogether
• They want the Fed reformed, not abolished
• The original idea of the Fed was to provide a uniform currency backed by gold

Why Was the Fed Created?

• Before the Fed, the number of nonnational banks was growing steadily, as was their percentage of total bank deposits.
• In 1896, non-national banks accounted for 61% of total deposits, and by 1913, they had increased to 71% and 57%
• Wall Street power was waning, as businesses financed growth from profits rather than borrowed funds, and interest rates were too high for many ventures
• Four representatives of J.P. Morgan, John D. Rockefeller, Kuhn, Loeb, and Paul Warburg devised a banking cartel that was written into law in late 1913
• The Fed monopolized the issue of all banknotes
• All national banks were drafted into the Fed
• Reserve requirements were reduced from 5:1 to 10:1
• With more credit available, banks could lower interest rates

Banks Violate Depositors' Property Rights

• Government law has never recognized the right of depositors to their property, meaning their deposits.
• Alan Greenspan in his famous 1966 essay writes: Since it is rarely the case that all depositors want to withdraw all their gold at the same time, the banker need keep only a fraction of his total deposits in gold as reserves. This enables the banker to loan out more than the amount of his gold deposits.

A "Banker's Bank" without Government

• In the interval between the War of 1812 and the Civil War, banking was de-centralized into state-chartered banks issuing banknotes redeemable in gold or silver coins
• One of the highlights of this period was the development of a clearinghouse in Boston called the Suffolk Bank
• The Suffolk System allowed New England banks to accept the notes of other banks, including country banks, at par with specie

Conclusion

• The Federal Reserve was not a sound institution that became corrupt. It was always a corrupt institution and has only grown more corrupt. Ron Paul has the right approach-End the Fed. Get it out of our lives and restore monetary freedom-the right to choose a medium of exchange.

https://mises.org/wire/fed-not-good-idea-became-corrupt-it-always-was-corrupt