The history of central banking in the United States does not begin with the Federal Reserve. The Bank of the United States received its charter in 1791 from the U.S. Congress and was signed by President Washington. The Bank’s charter was designed by Secretary of the Treasury Alexander Hamilton, modeling it after the Bank of England, the British central bank.
The Bank met with considerable controversy. Agrarian interests were opposed to the Bank on the grounds that they feared it would favor commercial and industrial interests over their own, and that it would promote the use of paper currency at the expense of gold and silver specie (Kidwell, 54). Ownership of the Bank was also an issue. By the time the Bank’s charter was up for renewal in 1811, about 70 percent of its stock was owned by foreigners. Although foreign stock had no voting power to influence the Bank’s operations, outstanding shares carried an 8.4 percent dividend. Another twenty year charter, it was argued, would result in about $12 million in already scarce gold and silver being exported to the bank’s foreign owners (Hixson, 115).
Secretary of State Thomas Jefferson believed the Bank was unconstitutional because it was an unauthorized extension of federal power. Congress, Jefferson argued, possessed only delegated powers which were specifically enumerated in the constitution. The only possible source of authority to charter the Bank, Jefferson believed, was in the necessary and proper clause (Art. I, Sec. 8, Cl. 18). However, he cautioned that if the clause could be interpreted so broadly in this case, then there was no real limit to what Congress could do. Then, curiously, in the memorandum in which he articulated his thoughts on this matter, Jefferson advised that if the President felt that the pros and cons of constitutionality seemed about equal, then out of respect to the Congress which passed the legislation the President could sign it (Dunne, 17-19). James Madison said the Bank was “condemned by the silence of the constitution” (Symons, 14).
Hamilton conceded that the constitution was silent on banking. He asserted, however, that Congress clearly had the power to tax, to borrow money, and to regulate interstate and foreign commerce. Would it be reasonable for Congress to charter a corporation to assist in carrying out these powers? He argued that the necessary and proper clause gave Congress the power to enact any law which was necessary to execute its powers. A “necessary” law in this context Hamilton did not take to mean one that was absolutely indispensable. Instead, he argued that it meant a law that was “needful, requisite, incidental, useful, or conducive to.” Then Hamilton offered a proposed rule of discretion: “Does the proposed measure abridge a pre-existing right of any State or of any individual?” (Dunne, 19). Hamilton’s arguments carried the day and convinced President Washington.
The Bank of the United States had both public and private functions. Its most important public function was to control the money supply by regulating the amount of notes state banks could issue, and by transferring reserves to different parts of the country. It was also the depository of the Treasury’s funds. This was an important function because, as later experience would prove, without a central bank, the Treasury’s deposits were placed in private commercial banks on the basis of political favoritism. The Bank of the U.S. was also a privately owned, profit-seeking institution. It competed with state banks for deposits and loan customers. Because the Bank was both setting the rules and competing in the marketplace especially irritated state banks, and they joined with agrarian interests and Jeffersonians in opposition to the Bank. The Bank was supervised by the Secretary of the Treasury who could inspect all the Bank’s transactions and accounts, except those of private individuals, and order audits on demand (Ibid, 11-13). The Bank’s ownership was set by $10 million in capital, divided into 25,000 shares of voting stock with a par value of $400 each. About 80 percent of the stock was sold to the public with the remainder capitalized by the federal government. No individual could own more than 30 shares. Shares were also sold to foreigners, although the Bank’s charter did not grant them voting rights (Phalle, 43).
Dean Henderson of GlobalResearch.ca has this to say about the Alexander Hamilton and the first U.S. bank:
With Rothschild financing Alexander Hamilton founded two New York banks, including Bank of New York. [1] He died in a gun battle with Aaron Burr, who founded Bank of Manhattan with Kuhn Loeb financing. Hamilton exemplified the contempt which the Eight Families hold towards common people, once stating, “All communities divide themselves into the few and the many. The first are the rich and the well born, the others the mass of the people…The people are turbulent and changing; they seldom judge and determine right. Give therefore to the first class a distinct, permanent share of government. They will check the unsteadiness of the second.”[2]
Hamilton was only the first in a series of Eight Families cronies to hold the key position of Treasury Secretary. In recent times Kennedy Treasury Secretary Douglas Dillon came from Dillon Read (now part of UBS Warburg). Nixon Treasury Secretaries David Kennedy and William Simon came from Continental Illinois Bank (now part of Bank of America) and Salomon Brothers (now part of Citigroup), respectively. Carter Treasury Secretary Michael Blumenthal came from Goldman Sachs, Reagan Treasury Secretary Donald Regan came from Merrill Lynch (now part of Bank of America), Bush Sr. Treasury Secretary Nicholas Brady came from Dillon Read (UBS Warburg) and both Clinton Treasury Secretary Robert Rubin and Bush Jr. Treasury Secretary Henry Paulson came from Goldman Sachs. Obama Treasury Secretary Tim Geithner worked at Kissinger Associates and the New York Fed.
Thomas Jefferson argued that the United States needed a publicly-owned central bank so that European monarchs and aristocrats could not use the printing of money to control the affairs of the new nation. Jefferson extolled, “A country which expects to remain ignorant and free…expects that which has never been and that which will never be. There is scarcely a King in a hundred who would not, if he could, follow the example of Pharaoh – get first all the people’s money, then all their lands and then make them and their children servants forever…banking establishments are more dangerous than standing armies. Already they have raised up a money aristocracy.” Jefferson watched as the Euro-banking conspiracy to control the United States unfolded, weighing in, “Single acts of tyranny may be ascribed to the accidental opinion of the day, but a series of oppressions begun at a distinguished period, unalterable through every change of ministers, too plainly prove a deliberate, systematic plan of reducing us to slavery”. [3[
But the Rothschild-sponsored Hamilton’s arguments for a private US central bank carried the day. In 1791 the Bank of the United States (BUS) was founded, with the Rothschilds as main owners. The bank’s charter was to run out in 1811. Public opinion ran in favor of revoking the charter and replacing it with a Jeffersonian public central bank. The debate was postponed as the nation was plunged by the Euro-bankers into the War of 1812. Amidst a climate of fear and economic hardship, Hamilton’s bank got its charter renewed in 1816.
References:
- The Robot’s Rebellion: The Story of the Spiritual Renaissance. David Icke. Gateway Books. Bath, UK. 1994. p.156
- Democracy for the Few. Michael Parenti. St. Martin’s Press. New York. 1977. p.51
- Fourth Reich of the Rich. Des Griffin. Emissary Publications. Pasadena, CA. 1978. p.171
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