U.S. Banking History Timeline Relevant to the Rise of Debtism & Our Current Financial Crisis
American citizens and leaders, as well as non-Americans wanting a deeper understanding of the root causes beneath our latest financial crisis, need a deeper understanding of the history that made this debacle possible. This post provides a timeline summarizing that history. Each historical event contains an event description, source information links, and my opinion about what the event means in the larger context of our current crisis. Please do post your responses to what I have written below. If you are aware of any additional crucial historical events I may have missed in constructing this timeline, please do alert me about this too.
1791: First US Bank
Details: In accordance with the U.S. Constitution’s mandate that the federal government be responsible for issuing U.S. currency, Congress charters the First Bank of the United States to engage in general commercial banking and act as fiscal agent of the government.
Sources:
http://www.factmonster.com/ipka/A0801059.html
http://www.factmonster.com/ce6/bus/A0856839.html
http://www.occ.gov/DUALBANKING.pdf
Dr. Gruder’s Comments: The framers of the U.S. Constitution recognized that placing currency creation in the hands of commerce did not serve the common good. They therefore placed this responsibility in the hands of the federal government on behalf of citizen protection.
1797: First National Banking Scandal
Details: President Alexander Hamilton makes secret payments to James Reynolds, a convicted swindler whose release from prison has been allowed by the Treasury Department. Hamilton admits these payments to members of Congress, but characterizes them as bribes to prevent public disclosure of adultery Hamilton had committed with Reynold’s wife, Maria. Some historians believe Hamilton fabricated the affair and bribes to cover-up his own illegal activities of selling insider information to select friends while in the role of Secretary of the Treasury.
Source:
http://www.civil-liberties.com/pages/conspiracy.html
Dr. Gruder’s Comment: A sex scandal makes an attention-getting cover-up for a national banking scandal. Diversion strategies like this are now all-too-commonplace in politics. A current example of diversion is that the media have been so focused on reporting the financial crisis that they under-reported the release of an incredibly important report about a truly important lack of governmental integrity that determined that political influence had indeed been improperly used by the Justice Department in selecting and firing federal prosecutors.
1811: First National Bank Dies
Details: Congress refuses to renew the charter of the First Bank of the United States.
Source: http://www.factmonster.com/ce6/bus/A0856839.html
Dr. Gruder’s Comment: The U.S. has had difficulty from the start in creating a banking structure that serves the common good.
1832: Second National Bank Dies
Details: The Second National Bank is chartered in 1816. In 1832, President Andrew Jackson vetoes the Second Bank of the United States re-charter on the grounds that the Bank is unconstitutional. In a speech, President Jackson attacks the bank as a danger to the future of the republic itself because of being undemocratic, monopolistic, parasitical, and controlled by foreigners.
Source: http://www.civil-liberties.com/pages/conspiracy.html
Dr. Gruder’s Comment: Irresponsible debt and corruption issues contributed significantly to the deaths of both the First and Second Banks of the United States.
1863: National Bank Act Established
Description: Congress passes the National Bank Act, which permits a system of banks to develop that are to be chartered by the federal government.
Source: http://www.factmonster.com/ce6/bus/A0856839.html
Dr. Gruder’s Comment: Since two attempts to adhere to the constitutional mandate failed, Congress decides to indirectly fulfill this mandate using a different strategy that will directly contribute to the great stock market crash of 1907.
1886: Corporations Become U.S. Citizens… Allegedly
Description: Supreme Court Chief Justice Morrison R. Waite states in open court that "We all [the entire Supreme Court] are of the opinion" that the 14th Amendment applies to corporations.
Sources:
http://en.wikipedia.org/wiki/Santa_Clara_County_v._Southern_Pacific_Railroad
http://www.alternet.org/story/38406/
http://www.reclaimdemocracy.org/personhood/santa_clara_vs_southern_pacific.html
Dr. Gruder’s Comment: Despite the Chief Justice’s statement in open court, the Supreme Court never issued an official written opinion stating that corporations should be considered "persons" who enjoy the protections of the 14th Amendment… let alone proclaiming that corporations are entitled under the Bill of Rights to fully equal footing as humans. Despite this, numerous attorneys in subsequent cases erroneously cite Waite’s comment as if it is an official ruling. This distortion continues to influence court rulings to this day. It also created a bogus justification for the out-of-control corporate lobbying that has come to dominate Congress and the Pentagon, to the extreme detriment of both the common good and the wellbeing of individual citizens. This has had a huge — and largely unacknowledged — role in helping to create a climate in which greed-dominated banking practices have been allowed to compromise the very foundation and viability of our economic system.
1907: First Stock Market Collapse of the Twentieth Century
Description: After having reached new peaks in 1906, the U.S. stock market collapses near 50 percent in January, 1907. This event becomes known as The Panic of 1907 — a time of economic recession with numerous runs on banks and trust companies. Panic soon spreads throughout the nation causing many local banks and business to close. One cause is the numerous banks in New York City withdrawal of market liquidity to avoid bankruptcy, due to the lack of a significant lender of last resort. U.S. has no central bank at this time to instill liquidity back in the market. The crisis is investigated in 1908 and this ultimately leads to the creation of the Federal Reserve System.
Source: http://en.wikipedia.org/wiki/Panic_of_1907
Dr. Gruder’s Comment: I believe we see here what occurs through the combination of two factors — The 1863 National Bank Act (through which Congress abdicates its constitutional mandate by allowing a system of banks to develop that are chartered by the federal government) and an 1886 statement by the Chief Justice of the U.S. Supreme Court that was distorted to mean that the U.S. government should treat corporations as though they have the same rights as U.S. citizens.
1913: The Federal Reserve Bank is Established
Description: The Owen-Glass Federal Reserve Act is enacted, establishing the Federal Reserve Bank, a part government/part private entity, which is sometimes referred to as a “duo banking” system. The Federal Reserve fails to immediately stabilize the banking and monetary system.
Sources:
http://www.u-s-history.com/pages/h1052.html
http://en.wikipedia.org/wiki/Federal_Reserve_Act
Dr. Gruder’s Comment: The failures of the First and Second National Banks demonstrated that they federal government did not know how to properly manage the U.S. banking system. The Panic of 1907 demonstrated that unbridled capitalism was incapable of regulating itself sufficiently to properly manage a banking system either. So, a hybrid system (known in some circles as duo-banking) was adopted in the form of the Federal Reserve. The Federal Reserve would soon (in 1931) prove to be similarly incapable of serving the common good.
1929: The Great Depression Begins
Description: The stock market crashes once again and by 1931, more than 1,000 U.S. banks fail as borrowers default and bank assets dramatically decline in value.
Source: http://www.factmonster.com/ipka/A0801059.html
Dr. Gruder’s Comment: This is a second demonstration of damage that can occur when two dangers combine — abdicating the constitutional mandate for the federal government to control the banking system, and erroneously treating corporations as having the same rights and privileges as citizens.
1933: President Franklin Delano Roosevelt Takes Drastic Action
Description: President Roosevelt confiscates private citizens gold and hands it over to the private banks.
Sources:
http://www.libertyforlife.com/banking/federal_reserve_bank.html
http://www.libertyforlife.com/banking/us-roosevelt-gold-theft.htm
Dr. Gruder’s Comment: I suspect this was an attempt to end the Great Depression through restoring U.S. currency to the gold standard so that money would once again be viewed as having legitimate value. It appears that this intervention didn’t have the intended effect.
1959-1961: U.S. Treasury Sells Gold to Foreign Central Banks
Description: In an attempt to erase what remains of the U.S. deficit, the U.S. Treasury sells a chunk of its gold to foreign central banks. U.S. gold losses become front-page news in papers like The New York Times.
Source:
http://www.rich.frb.org/publications/economic_research/economic_quarterly/pdfs/spring1996/hetzel.pdf
Dr. Gruder’s Comment: By the mid 1950s foreign banks have a controlling interest in the Federal Reserve Bank. This takes the U.S. banking system even further away from the constitutional mandate that the U.S. government controls U.S. currency. This drastic action that was taken as an attempt to eliminate the federal debt failed to serve as a warning to future generations of politicians and citizens to make sure that the government’s expenditures did not exceed its income.
1960: President Eisenhower Warns About the Dangers of the "Military-Industrial Complex" to the Wellbeing of the U.S.
Details: President Eisenhower takes the unusual step of delivering a farewell address because he feels a deep need to warn the public about the profound dangers being created by what he originally terms the Military-Industrial-Congressional Complex. In his speech he waters down this term into the Military-Industrial Complex because he is afraid to alienate the legislative branch of the federal government, with whom he has enjoyed an unusually positive relationship as president.
Sources:
http://www.eisenhower.archives.gov/speeches/farewell_address.html
http://en.wikipedia.org/wiki/Military-industrial_complex
http://www.whywefight.com
Dr. Gruder’s Comment: Eisenhower’s wise warning went largely unheeded. Ignoring this alert issued by a man who had been a five-star general allowed the defense industry and the Pentagon to succeed at manipulating congress into spending hundreds of billions, if not trillions, of dollars more than the constitutional mandate for providing a common defense required. This improper lobbying of congress was made possible in large part through corporations having erroneously been awarded citizen status in 1886 (see that timeline item above). I consider the movie about Eisenhower’s warning, entitled "Why We Fight," to be mandatory viewing for all U.S. citizens.
1963: President John Kennedy Takes Drastic Action
Description: President John Fitzgerald Kennedy signs Executive Order #11110, which requires the U.S. government to stop borrowing money from the Federal Reserve and paying interest on it. Kennedy is assassinated three weeks later. One day after Kennedy’s assassination, all the United States notes that Kennedy issued as a result of this executive order, were called out of circulation, restoring power back to the Federal Reserve to charge the federal government interest. After Kennedy’s assassination, President Lyndon Johnson chose to ignore Executive Order #11110. See 1987 below for more.
Sources:
www.john-f-kennedy.net/executiveorder11110.htm
www.presidency.ucsb.edu/ws/index.php?pid=59049
www.financialsense.com/fsu/editorials/kirby/2007/0206.html
Dr. Gruder’s Comment: President Kennedy’s bold move dared, I believe, to assert that the money in the duo-system Federal Reserve was actually the government’s money to use on behalf of the American people without having to pay interest. I further believe that, had Kennedy lived, this executive order would have been but his first step toward in returning the U.S. government to its constitutionally mandate to issue the currency for the U.S.
1971: The U.S. Completely Abandons the Gold Standard
Description: 1971 marks the point when the U.S. completes its process of total abandoning the gold standard that had originally backed the legitimacy of its currency. President Richard Nixon approves this shift from gold-backed currency to "Fiat Money:" invented money that is not backed by any collateral, let alone gold. This shift converts money from what in economics is defined as asset to what economics defines as a liability.
Source:
http://en.wikipedia.org/wiki/Inflation
Dr. Gruder’s Comment: The shift to Fiat Money gives the Federal Reserve unprecedented power to alter the money supply at will in an attempt to control inflation and minimize economic downturns. Not only did this move us even further from the constitutional mandate that the federal government control the currency. More importantly, this shift from commodities-backed money (gold and silver) to the rough equivalent of monopoly money has not succeeded at in controlling inflation or preventing economic downturns. This, I believe, is because it was an attempt to control symptoms rather than deal with the root causes of what causes lack of financial integrity to begin with. I further believe that turning money into something fictional rather than real has made it much easier to justify amassing utterly unmanageable amounts of debt. As of mid-2008, the total debt in the consumer, banking, business and government sectors had grown to nearly $50 TRILLION dollars!
1980s: An Era of Deregulation and Supply-Side Economics Begins
Description: President Ronald Reagan initiates an era of unprecedented governmental deregulation, including in the banking and investment systems, and initiates trickle-down supply-side economics.
Sources:
http://www.socialstudieshelp.com/Eco_Deregulation.htm
http://www.questia.com/PM.qst?a=o&d=15343830
Dr. Gruder’s Comment: Despite continuing to be favored by many in the economic and business communities, I believe that the combination of deregulation and trickle-down economics contributed significantly to initiating an era of unparalleled greed, as well as a fundamental economic shift in the U.S. from primarily being a capitalism-oriented economic system to becoming entrapped in a Debtism-based economy. Government over-regulation undermines individual freedom and thus violates the U.S. Constitution. Government deregulation undermines the common good and thus violates the U.S. Constitution. The sooner that American citizens re-educate themselves about what the U.S. Constitution really mandates, the sooner Congress will be successfully pressured to fulfill its constitutional responsibilities on behalf of the American people despite fear of retribution by the financial and business communities. The Preamble of the U.S. Constitution is the mission statement of the United States federal government. Every U.S. citizen therefore has a duty to read, understand and honor it. Fulfilling this responsibility is the essence of true patriotism. To read the Preamble, along with my comments about it, click HERE.
1982: Federal Reserve Ruled Privately Owned Not Publicly Held
Description: A Federal Circuit Court rules in Lewis v. United States, that the Federal Reserve Banks are independent, privately owned and locally controlled corporations, not governmental agencies.
Sources:
http://www.fdrs.org/federal_reserve_bank.html
http://www.save-a-www.patriot.org/files/view/frcourt.html
Dr. Gruder’s Comment: This ruling finally and decisively determined that the U.S. banking system is run by the corporations not the federal government, despite the constitutional mandate to the contrary. When this was last the case during much of the 1800s, this unbridled free market control of not only the economy but the currency led to the same kinds of financial damage that we are experiencing today.
1987: President Kennedy’s Executive Order 11110 is Formally Rescinded
Details: President Reagan signs Executive Order 12608 which formally rescinds Executive Order 11110 authorized by President Kennedy.
Source:
www.john-f-kennedy.net/executiveorder11110.htm
Dr. Gruder’s Comment: This executive order officially re-eliminates the U.S. government’s constitutional mandate to control the currency. It restores this power entirely back to the Federal Reserve, which has now been determined in court (see above) to be privately held, not an arm of the federal government.
1999: Financial Services Modernization Act Approved
Details: The Financial Services Modernization Act, also known as the Gramm-Leach-Bliley Act, is adopted by Congress and signed by President Clinton. Under its rules, commercial banks, brokerage firms, institutional investors and insurance companies can freely invest in each other’s businesses as well as fully integrate their financial operations. This legislation nullifies the Glass-Steagall Act of 1933, a pillar of President Roosevelt’s "New Deal," which was put in place in response to the climate of corruption, financial manipulation and "insider trading" resulting in more than 5,000 bank failures in the years following the 1929 Wall Street crash.
Sources:
http://globalresearch.ca/index.php?context=va&aid=10268
http://banking.senate.gov/conf/grmleach.htm
Dr. Gruder’s Comment: Our collective refusal to learn from history has once again led to disastrous consequences. Look closely at all of the prior timeline elements that have lead up to this decision. You can connect the dots for yourself. All you needed was the dots to be provided to you. Are you now getting a clearer picture about the root causes behind our current financial debacle that go far, far beyond severe integrity deficits in the mortgage industry?
2008: Financial Banking Sector Melts Down
Details: The Financial Banking sector is the first sector of a debt-ridden economic system to melt down, sparked in large part by the widespread practice of awarding of subprime mortgages to non-qualifying home buyers.
Sources:
http://en.wikipedia.org/wiki/Subprime_meltdown
Dr. Gruder’s Comment: When I view this development in the context of the above timeline, it seems clear that the source of the fundamental dysfunctionality and financial integrity deficits underlying this crisis is a combination of Debtism, “Fiat money” [invented currency not backed by commodities such as gold and silver], supply-side trickle-down economics, and the U.S. government’s abdication of its constitutional mandate to control the money. For more details about Debtism, go to www.TheNewIQ.com/delusions-about-debt
[Thanks to Cherish Lytle for fact-checking this material.]
