By Marilyn Barnewall Â© 2005 Marilyn Barnewall Most Americans believe the Federal Reserve is part of the federal government. It is not. If you ask Americans who creates our money, most will answer âthe governmentâ or âthe treasury.â Neither is true. Today that responsibility falls to Alan Greenspan. Americaâs founding fathers were very specific about the creation of money. Article I, Section 8 of our Constitution charges the Congress with âthe power to coin money and regulate the value thereof.â Many people argue it violates the Constitution to turn these powers over to a non-governmental, privately-owned, highly profitable, outside third party like the Federal Reserve that is structured very much like any world cartel. Thomas Jefferson once said that a private central bank (like the Federal Reserve) which issues the public currency was âa greater menace to the liberties of the people than a standing army.â Speaking on the floor of the House of Representatives on June 10, 1932, Congressman Louis T. McFadden launched a twenty-five minute tirade against the Fed. Some of his remarks: "Mr. Chairman, we have, in this country, one of the most corrupt institutions the world has ever known. I refer to the Federal Reserve Board and the Federal Reserve banks. The Federal Reserve Board, a government board, has cheated the government of the United States out of enough money to pay the national debt.â What the Fed Reserve does is create money out of nothing and charges interest for it. One way they do this is by increasing the money supply whenever a loan is made. When the funds from a loan are deposited in a bank account, the money supply is increased â from thin air. If you ever wondered why our economy is so dependent upon credit to survive, you might want to think more about this little-known fact. The Federal Reserve is a banking cartel. A cartel is a group of independent businesses joined together to coordinate the production, pricing, or marketing of a product for members -- very much like OPEC does for oil producing countries in the Middle East. The Federal Reserve is a cartel of bankers and investment bankers who coordinate the production, pricing and marketing of money in the United States. This particular cartel also utilizes the police power of the federal government to enforce its agreements. Member banks own the Federal Reserve System. Private investors own member banks. The birth of the Federal Reserve began one windy November night in 1910 at a New Jersey train depot. Rhode Island Senator Nelson Aldrich, the political spokesman at the time for big business interests, hosted a âhuntingâ party. His private railway car was hooked to a train that, after a few transfers to other trains, would get people close to Jekyll Island. They were then transported by yacht to the island. In a 1935 The Saturday Evening Post article, one of the men on that train to Jekyll Island -- Frank Vanderlip -- made an interesting confession. He wrote: âI do not feel it is any exaggeration to speak of our secret expedition to Jekyll Island as the occasion of the actual conception of what eventually became the Federal Reserve System.â Senator Aldrichâs party consisted of: - Abraham Piatt Andrew, Assistant Secretary of the United States Treasury - Frank A. Vanderlip, president of National City Bank of New York (now Citibank, then representing William Rockefeller and Kuhn, Loeb & Co, international investment bankers) - Henry P. Davison of J.P. Morgan Company - Charles D. Norton, president of J.P. Morganâs Bankers Trust Company - Paul M. Warburg, a partner in Kuhn, Loeb & Company, was also part of the group. Warburg represented the Rothschild banking dynasty in England and France. Mr. Warburg was the brother of Max Warburg who headed a banking consortium in Germany and the Netherlands. It is clear these are the men who created our Federal Reserve System. It is equally clear none of them are viewed historically as patriots. They are known for being concerned with building and maintaining the traditional wealth housed in Europe and on the East Coast of the United States. The plan that emerged from Jekyll Island was pretty simple. These men wanted a central bank that allowed them to control the money supply in the U.S. They knew Americans would not tolerate a central bank. Many Americans of the day had emigrated from Europe. They knew how central banks operate. An entity had to be created that looked like a duck, walked like a duck, but was not called a duck -- or, a central bank. Further, the entity had to look like it was controlled by Congress, but a majority of its members would be selected by privately-owned banks that owned the largest portion of its stock. Is this significant? Does it matter? In 1913, $1,000 could buy what it took $10,000 to buy in 1994. The Federal Reserve has three primary components. The Board of Governors determines the systemâs monetary policy. The Board consists of seven members, appointed by the President and confirmed by the Senate. Each term is for 14-years and each is staggered so no single President can dominate Federal Reserve policy. In other words, there is little control of the Fed by elected government officials. Regional Reserve Banks hold cash reserves of the system, supply currency to member banks, clear checks, and act as fiscal agents for the government. Member banks elect directors of the regional Reserve Banks in each of their regions. Larger banks -- Bank of America, Citibank and Chase Manhattan, for example -- hold more shares than smaller banks. However, they have only one vote in the selection of Regional Reserve Bank directors. The Federal Open-Market Committee implements monetary policy set by the national Board. It, however, controls most of its own policy. It manipulates our money supply and interest rates by purchasing or selling government securities. It may do this via the purchase or sale of foreign currencies and securities of other governments. Money is created and interest rates go down when the Fed purchases. When the Fed sells government securities, the money supply is reduced and interest rates go up. The Committee is made up of the national Board of Governors plus five of the twelve regional Presidents. Twenty-four bond dealers handle all sales of government securities. Government agencies may not exchange with each other without paying dealersâ commissions on each transaction (talk about a sweet deal for bond dealers!). Fed monetary policy decisions are made at secret meetings. We, the public, get a brief report a few weeks after decisions are made. Transcripts of deliberations are destroyed ... a policy which started when, in 1970, the Freedom of Information Act was passed. Theoretically, the CIA cannot get away with the kind of secrecy this non-government board can! The federal government does not own any stock in the Federal Reserve System. The Fed is privately owned. However, member banks may not sell or pledge their stock nor does it carry voting rights. No matter how many shares of stock a bank owns, it gets only one vote. In essence, owning stock in the Federal Reserve doesnât imply ownership. It just shows how much operating capital each bank has in the system. The U.S., except for a brief period of time, operated without a central bank from the time the nation was founded under the Constitution, in 1789, until 1913. Unless my math is off, thatâs 124 years. We have operated under the concept of a central bank (Federal Reserve) for only 78 years. The Congress could abolish the Federal Reserve System by a single majority vote. If the vote is vetoed by the Executive Branch of government (the President), a two-thirds majority vote would be required to override the veto. If the System is abolished, all bank-clearing functions can easily be transferred to the Treasury. The power to âcoin money and regulate the value thereofâ could once again fall under the oversight of the Congress, where our Constitution says it should be. There is an excellent book about the Fed and the tale of Jekyll Island. I highly recommend The Creature from Jekyll Island by G. Edward Griffin, published by American Opinion Publishing. Since no agency, government or otherwise, has more impact on our financial lives than the Federal Reserve, it is a topic with which all Americans should be familiar. Very few are. Marilyn Barnewall, in 1978, was the first female to be named vice president in charge of a major loan and deposit portfolio at Denverâs largest bank. She started the nationâs first private bank, resigned to start her own firm and consulted for banks of all sizes in America and other countries. In June 1992, Forbes dubbed Barnewall âthe dean of American private banking.â Author of several banking texts, she has written extensively for the American Banker, Bank Marketing Magazine, and was U.S. consulting editor for Private Banker International (Lafferty Publications, London/Dublin). This article originally appeared in the Grand Junction Free Press. Marilyn can be reached at firstname.lastname@example.org.