Money and Banking, as I see it, by Gloria Poole
This
is my effort to discuss the problems that have occurred in the banking industry based upon what I have observed from having
bank accounts for decades, and from
researching based upon information I learned in the course "Money and Banking'
at the University of Georgia. The problems I see are:
1) Some, most banks in the U S use usury to fund their
deposits charging from $ 29-34 for an overdraft that is a nano-second of time transaction by computer, and thus
causing
more overdrafts for most families.
2) Not having sufficient reserves to cover their outstanding debts or loans they
make.
3) Making bad loans to people who had no way to repay them, no assets and no down-payment [investment into
the loan].
4) Separating from banks the credit cards and debit cards to third parties so that banks have no responsibility
for them and in no cases, knowledge of how much is owed on them.
5) Obama created a run on banks when for his own
campaign advantage manipulated the banks to create the fears that he then took advantage of, in his effort to federalize the
banking system.
He has a galloping socialism plan for all industries and he must be defeated.
6)
The gold in Fort Knox was sold when the U S went off the gold exchange and the paper money is depreciated because there is
no faith in the United States government
presently,so the paper money is not backed up by anything. History
has proved time and again that renders it meaningless when government could print more to cover
debts with worthless
paper.
7) The US is printing new money to circulate and depreciating the dollar.
8) The U S government
is paying its debts with borrowed money and has no reserves.
9) The efforts by a few to take-over the nation and
take the power of the many people and put it into the hands of a few is the main problem.
Also, I
researched with the information: History of Banking in America written by James William Gilbank and provided as a download
by McMaster University in Connecticut. I am summarizing the points here that seem very significant to me from the 110 pages
[on the web but more than 200 pages in paper copy] . I am going to present a brief summary of the history of banking using
this source quoted. You will see that the fights over money have occurred since the beginning of this nation, and indeed occur
everywhere
when greedy men try to take over the wealth of the nation.
In the colonies to begin with commodities
like tobacco and corn were the methods of exchange. And there was no paper or metal currency. Some states did not issue
a
currency until the American Revolution. At commencement of the American Revolution [declaration of independence from King
of England] the Continental Congress
issued 'continental money' on May 10, 1775; and set the value of the paper
money equal to that sum in silver and /or gold. Over time of the war, the paper money
depreciated in
value because the people lost confidence in the government's ability to redeem it with gold or silver.The Continental Congress
authorized and issued
$30 Million and at the end of the war, that $30 million had depreciated to about $9 million
in value,with the situation of needing six paper dollars to equal one silver dollar.
According to
the 'report of the Treasury " in 1790 the issue of continental money for the years of 1776-1781 were $357,476,541 that was
worth only $2,070,485 in silver.
In 1781,the U S Congress chartered the "Bank of North America' in Philadelphia,
and it commenced on Jan 7, 1782. It was considered evil and the charter was repealed
on Sept 1785 in Pennsylvania.
In 1787, it was reincorporated in Pennsylvania only.
After the American Revolution, the
Congress decided that no state should coin money, emit bills of credit ,make anything BUT gold and silver as legal tender
in payment
of debts, or pass any law impairing the obligation of contracts, and the power to coin money and regulate
the value of it, was given exclusively to the Congress. That is
included in the U S Constitution still. The
U S Constitution was adopted in 1789 and ratified by the people and the government was organized. They then chartered the
"Bank of the United States' in 1791. Immediately the Constitutionality of it was challenged when it was
presented
to then President George Washington for his signature. Justice Story wrote that 'the power to incorporate a bank is
not among those enumerated in
the constitution".
On 14 Dec 1790, the Secretary of
the Treasury Alexander Hamilton reported to Congress the plan of the National Bank.James Madison opposed it on the grounds
that
it is unconstitutional and that the Constitution did not delegate any such authority to the Congress. It was
supported by the "Federal Party'. The bill passed in Feb 1791 and was presented to President Washington for his signature.
He consulted with his advisors as to whether he should sign it or veto it. Thomas Jefferson was Secretary of
State
and opposed to it. Edmund Randolph was Attorney-General of the U.S and also opposed to it. Alexander Hamilton Secretary of
the Treasury was in favor of
ir. Gen Knox, Secretary of War, was also in favor of it. The idea of a federal bank
began with Alexander Hamilton who is called the 'founder of American finance".
On the 4th-March-1811
the Charter for the Bank of the United States expired and the Congress would not renew it. It's capital was $10 million, and
the shares were
divided and the U S government bought 5,000 shares valued at $2 million. It was declared to be mainly
of "financial and political character; and was challenged as
to the Constitutionality of it again, and at that time
it was decided it was necessary to 'execute the powers that were enumerated '.When Thomas Jefferson was
President,
he again opposed it and the charter was not renewed.
In June 1812, war was declared against
England and all banks in the South and the West suspended specie payments. "The very large and unforeseen advances
[of
specie/money] to government were the immediate cause of the suspension of payments' per statement of Mr Albert Gallatin. And
this caused a "great and
continued run on banks', and 'a considerable degree of occasioned alarm and distrust'.
And he said 'the circulating capital is concentrated in large cities" and
the U S 'floating debt' of treasury
notes [T-bills as they are called now] amounted to "$ 11 million 200 hundred and fifty thousand". And also, 'banks made
advances
[ to the federal government] beyond their resources either by their own subscriptions [buying debt] or by enlarging their
discounts in favour of the
subscribers [modifying the terms due]. Dissolution of the "Bank of the United States'
caused state banks to 'take up the papers formerly discounted by
that of the United States", and created new
state banks. The 'expectation of great profits gave birth to a much greater number than was wanted." From
Jan
1811 to Jan 1815, 120 new banks were chartered.
In Feb 1815, peace with England was declared,
and the general thought was that the National Bank would resume. There was 'such a scarcity of money
that the taxes
could not be collected." The U S government began issuing Treasury notes [debts ] resembling 'exchequer bills in England'
that paid
6% interest to those who would buy them. The transmission of money from state to state was a logistical
problem often requiring hand delivery of check
or sending by courier. The US Government was 'obliged to employ as
agents for receiving the taxes, a vast number of banks." And banks refused to honor
the notes of other banks. The
U S Treasury had accounts at 94 banks. The money banks had was :1) Tax money, 2) notes of other banks, 3) Treasury notes
bearing
interest, 4) small treasury notes not bearing interest, and 'as to coin, that was out of the question'.
The
charter of the second "Bank of the United States" was in 1816 in that session of Congress, with a capital of $ 35 million
divided as 350,000 shares at
$100 each, and the U S bought 70,000 shares and the payment was made as 1/4 in gold/silver
and the rest in coin. It was declared lawful for the U .S to
redeem debt and for banks to sell silver and gold'
but they could not sell more than $2 million in any one year. The management of the federal bank of the
United
States was delegated to 25 directors, five of whom were appointed by the President, and there could not be more than 3 from
any given state, and
the other 20 were from "qualified stockholders' but only those stockholders who were U S Citizens
could vote. The debts contracted could not exceed $35 million
nor could they make any loan to the U S government
greater than $500,000. It began business in Jan 1817 in Philadelphia. Immediately the state banks
began to
fail as money shifted to the federal bank. This second "Bank of the United States' made 'very liberal advances to the
Western states' and were
compelled to 'resort to measures for compelling repayment of debts in gold' . The
second 'Bank of the United States' established branches in every State.
In Sept 1830 the liabiliites of the Bank
of the United States were ' $15,347,657.
The main advantage to a federal bank was considered
to be the 'uniformity of duties and taxes of every description, internal and external, direct or
indirect,"
and a "essential and fundamental principle of the Constitution. ' There were 2 methods of doing this suggested : metal currency
of gold and silver,
and paper money of uniform value across the nation. And also the goal was stated that it 'gives
a complete guarantee that under any circumstances,
its notes will preserve the same uniformity of which they
now possess. " [Remember that changed with the 'reform' that created the FDIC that
guaranteed only about a 1/10
of what any depositor paid in .] And they bragged that the federal bank 'lawfully checked any excessive issues
[of
currency] on the part of state banks. " At that time they concluded that money for war had to be set aside in reserve
and not expected to come
from taxation, and it had to be set aside before a war was declared,and not to be funded
with debts. "The greatest inducements in order to obtain
loans on moderate terms consists in the probability
that if the distribution proceeds slower than had been anticipated the subscribers [investors who
bought debts]
will not be compelled to sell the stock, and by glutting the market, to sell it at a loss."
In
1832, Congress passed a law to renew the charter of the second "Bank of the United States' but President Andrew Jackson vetoed
it and gave his reasons
to Congress based upon the grounds that the bank itself is unconstitutional. I am
quoting the highlights of his words to Congress that accompanied his veto:
he had considered it 'in regard
to the principles of the constitution' and 'came to the conclusion that it ought not become a law', because 'some of the
powers
and privileges possessed by the existing bank [Bank of the United States, federal] are unauthorized by the constitution, subversive
to the rights
of the states, and dangerous to the liberties of the people... I can percieve none of the modifications
[by Congress when they tried to renew ] of the
bank charter which are necessary, in my opinion, to make it
compatible with justice, with sound policy, or with the constitution of our country." President
Jackson reminded
them that the Bank of the United States had a 20 year history by that time from which to judge it, and he said, the management
by the
federal government was a "monopoly' on money, ' exclusive privilege' , 'monopoly on foreign and domestic
exchange' and that the 'powers privileges and
favors bestowed upon it in the original charter by increasing values
of stock far above its par value operated as a gratuity of many millions to the stock-
holders." President Jackson
also said, 'the modification of the existing charter proposed by this act are not such in my view as make it consistent
with
the rights of the States or the liberties of the people", and 'by documents submitted to Congress, that of 1st Jan 1837
of the 20 millions of private
stock [in the Bank of the United States] $8,045,000 was held by foreigners mostly
Great Britain." And he stated that the western states still were using
most of the debt and creating most of the
debts. He warned that the 'entire control of the constitution would necessarily fall into the hands of a few
citizen
stockholders and the ease with which the object would be accomplished would be a tempation to designing men to secure that
control in
their own hands by monopolizing the remaining stock". Also he said, 'there is a danger that the
a President and directors [of a federal bank] would
be able to elect themselves from year to year, and without
responsibility or control manage the whole concerns of the bank. It is easy to conceive
great evils to our country
and its constitution might flow from such a concentration of power in the hands of a few men, irresponsible [not elected]
to the
people." And he continued, 'the government of the United States have no constitutional power to purchase
lands" [or houses or stocks for that matter]
except for forts, arsenals, dockyards, and ports. Congress did
not override his veto. The U S Senate wanted too, but the U S House opposed it
President Jackson ordered the
removal of the deposits of the Bank of the United States with the money to be placed into state banks. The Secretary
of
the Treasurer at that time was Duane,and he refused to do that. So he was removed from office, and someone who would do that
was appointed by
President Jackson. The Bank of the United States was liquidated and the money was placed in state
banks. President Jackson also wanted to
set the U S on a gold standard with gold backing up the paper
money. The U S Mint coined gold and silver coins with some gold from Mexico, some
from 'West Indies" some
from Africa,and most from the U S.
In June 1834, the U S House opposed the renewal of the charter
officially and defined the gold standard and silver standard. They set the value of a
$10 "gold eagle'
coin to contain 232 grains of 'fine gold' and '258 grains of 'standard gold' , and they defined all denominations of gold,
and declared
that the gold coins 'shall be receivable in all payments at the rate of 94 and 8/10ths of 100% and
they set the
standard of silver at 100/100. Mr Albert Gallatin complained that the 'erroneous value' set for
gold would cause a 'disappearance of gold ' to Europe since
at the existing exchange rate at that time, Europeans
and Brits could buy a $10 gold eagle coin in the U S at 4,61GBP and resell it for much more
in their countries
where the gold standards were that gold relative to silver was gold 15,2 greater than 1 silver;
and
the French defined it as 15,5 times greater than 1 silver of equal weight.
Mr Gallatin said the result would be
a total disappearance of U S gold over time. The exportation of America's gold to Europe was not a good thing and
Mr
Gallatin warned about this. He advised setting the gold's value to the true value and said again that the value set by the
US House of Representatives
at that time, was made 'by mistake' . President Jackson in his address to Congress
on Dec 1, 1834 that the "Bank of the United States' had become
the 'scourge of the people' by postponing repayment
of national debts' to hold onto the money ,'for the purpose of appropriating public money in a
political contest'
in a "corrupt and partisan loans' method, and that 'the unlimited power" of the President to " expend funds in hiring writers
and
procuring the execution of printing, the retention of pension money' and the 'system of unparalled excitement
[of the people] and the 'interruption of
domestic exchanges" was harmful. And 'a confession that all real
distresses which individuals and the country had endured preceding... had been
needlessly produced by it, [The federal
bank]. The amount of money transferred from the Bank of the United States to the state banks was "$16 million.
The
issue of a federal bank was not resolved but they could not override President Jackson's veto. In the next election
Martin van Buren won, but he
also did not approve of a federal bank, according to his statements in the U S Senate
in 1828. He thought the Congress did not have authority to create
a federal bank. However, in June 1836 The
Bank of the United States was chartered again and all banks received their charters from it. The charters
were drawn
from the 'same general rules" and "in these respects it stands opposed to the laws of this country' [because it does not allow
competition].
The national bank was undone again. And the U S went off the gold standard again so that paper
money is not backed up by anything in the U.S.
Also in analyzing the differences in banks in
Europe and England, in America the directors of a bank and its shareholders have no liability for their decisions
beyond
their own respective shares. But in England and other countries, the shareholders and directors of a bank have 'unlimited
liability' for the risks
they subject their customers [depositors] too, and they are liable to the 'full extent
of his property for all the debts of the bank." That produces a much
more secure position in the minds of the public
if the Directors of a bank stand to lose their own money by their decisions. When that is the legal environment
the
Directors and shareholders are very cautious with risk and risk-adverse. In the U S the directors and shareholders
as we saw this past year with
the bail outs of bansk are not at risk for their 'gambling' with the money of others
and there is a disincentive to be prudent. If you are 'gambling' with the
money that is not yours and you
suffer no losses regardless of what you do or decide,there is no incentive not to gamble because you would only stand
to
gain or not be any worse off in the worst case. That is what is wrong with banking in the U S. Also in some European
countries and England they
tax the debts whereas the U S taxes the income. The English tax the notes outstanding,
the liabilities,bonds, debts and that creates an incentive not to
have too many of those on the books.
The
Times of NY on April 2, 1837 wrote that 'public confidence was greatly shaken' and 'the injudicious interference of the government
in attempting
to regulate the currency has produced such a sense of speculation and such a transfer of specie
to the interior as to embarrass all the regular business
of the country", and that 'paper money being abundant in
the hands of a favoured few, these gentlemen turned their attention to the national domain",...
and 'every description
of property, foreign and domestic, personal or landed was greatly enhanced in price". President Jackson demanded payment
of
US debts with gold or silver because of the climate then That stabilized the nation and the currency. {In direct contrast,
when Obama was so-called'
rescuing banks he was doing it with money borrowed from foreign governments--illegal in
the constitution.]
The federal bank gave to itself the power to make money plentiful or scarce
by expanding or contracting it to manipulate the value of it. I quote"
the distress and alarm which pervaded and
agitated the whole country when the Bank of the United States waged war upon the people in order to
compel
them to submit to its demands, cannot be forgotten." Also, 'the ruthless and unsparing temper with which whole cities and
communities were
impoverished and ruined,...ought to be indelibly impressed on the memory of the people of the United
States." If the U S people had not conquered it
the government would have passed from the hands of the many to the
few.' And "eternal vigilance by the people is the price of liberty', and 'with such a [federal]
bank and paper money,the
money power would in a few years govern the State and control it..." You could and should read President Jackson's entire
words
to the Congress and to the people later on pages 194, and pages 195 of that History of Banking in America" .
If
you think about it, you will see that President Andrew Jackson was right and prophetic. The U S has the equivalent of a federal
bank in the Federal Reserve
and the problems are as stated by the previous President when he vetoed a federal bank.
The outcomes since Obama was campaigning and to this point in
time are the evils warned against. There is
no accountability for how TARP funds were used or who got them. There is distribution of monies by a a handful of men
in
an effort to buy political power and votes. There is withholding and 'reforming' pension money that was promised. There is
a scarcity of money for the
people because it is now concentrated in the hands of the Federal Reserve Bank
[a federal bank without authority in the U S Constitution.].
Saturday, 29 August, 2009
