An overview of how the current global banking system came to be?
This quick history is important because the Federal Reserve has always been a private clique bank since its inception in 1913. The clique masked its function by naming it the “Federal Reserve,” although it is neither “federal” nor is it a “reserve.” G. Edward Griffin wrote a book, which is a “keeper,” titled: The Creature from Jekyll Island: A Second Look at the Federal Reserve. I will be quoting him extensively because his insights are worth considering and I want you to get the full weight of his perspective. Concerning the history of banking, he wrote: “Banks (that take in money from depositors) first appeared in early Greece, concurrent with the development of coinage (gold, silver and other rare metal coins) itself. They were known in India at the time of Alexander the Great.
They also operated in Egypt as part of the public granary system. They appeared in Damascus in 1200 and in Barcelona in 1401. It was the city-state of Venice, however, which is considered the cradle of banking as we know it today.” “The Bank of Venice: In the year 1361, there already had been sufficient abuse in banking that the Venetian Senate passed a law forbidding bankers to engage in any other commercial pursuit, thus removing the temptation to use their depositors’ funds to finance their own enterprises. Bankers were also required to open their books for public inspection and to keep their stockpile of coins available for viewing at all reasonable times. In 1524, a board of bank examiners was created and, two years later, all bankers were required to settle accounts between themselves in coin rather than by check.”
It should be noted that the Glass Steagall Act of 1933 had the same intent as the law passed by the Venice Senate in 1361. The Act became law in the aftermath of gross excesses by bankers who endangered their depositors’ money by subjecting it to their own risky investments. The absence of this regulatory protection helped precipitate The Great Depression. On November 12, 1999, the Glass Steagall Act was repealed after approximately $100 million of lobbying activity (bribery by another name) by the financial industry. The key figures responsible for this disastrous decision were:
William Clinton, President.
Sanford Weill, CEO of Citigroup, which collapsed in late 2008.
Robert Rubin, Secretary of the Treasury (1995-1999) under President Clinton, now co-chairman of the Council of Foreign Relations.
Lawrence Summers, Secretary of the Treasury (1999-2001) under President Clinton 1
Phil Gramm, Republican Senator of Texas, now a lobbyist for UBS AG.
Jim Leach, Republican Senator of Iowa, now head of National Endowment of the Humanities.
Griffin continues describing banking practices in Venice in the 16the century:
“In spite of these precautions, however, the largest bank at the time, the House of Pisano and Tiepolo, had been active in lending against its reserves (the depositors’ money in coins, held in their accounts with the bank) and, in 1584, was forced to close its doors because of its inability to refund depositors (when the depositors came to get their money out of their accounts). The government picked up the pieces at that point and a state bank was established, the Banco della Piazza del Rialto. Having learned from that recent experience with bankruptcy, the new bank was not allowed to make any loans. There could be no profit from the issuance of credit.
The bank was allowed to sustain itself solely from fees for coin storage, exchanging currency, handling the transfer of payments between customers, and notary services (verifying signatures before transferring funds and before execution of documents to prevent fraud).” “The formula for honest banking had been found. The bank prospered and soon became the centre of the nation’s commerce. Its paper receipts (meaning checks) were widely accepted far beyond the country’s borders and, in fact, instead of being discounted (the paper receipts were exchanged for their face value, not a slightly lower amount, which was customary) in exchange for gold coin as was the usual practice, they actually carried a premium over coins.
This was because there were so many kinds of coin in circulation and such a wide variance of quality within the same type of coin that one had to be an expert to evaluate their work. The bank performed the service automatically when it took the coins into its fold. Each was evaluated, and the receipt given for it was an accurate reflection of its intrinsic worth. The public, therefore, was far more certain of the value of the paper receipts than of many of the coins and, subsequently, was willing to exchange a little bit more for them.”
Can you see how trust is built by, (i) being transparent, (ii) eliminating conflicts of interest, (iii) engaging in honest and reliable practices, and (iv) being overseen by honest, and third party auditors from the government? And can you sense how that trust is destroyed when fraud works its way into any or all of these four protections of the public interest described above?
To be continued…