The Federal Reserve, a private Corporation

by Scott Eric Rosenstiel

One of the most common concerns among people who engage in any effort to reduce their taxes is, "Will keeping my money hurt the government's ability to pay it's bills?" As explained in the first article in this series, the modern withholding tax does not, and wasn't designed to, pay for government services. What it does do, is pay for the privately-owned Federal Reserve System.

Black's Law Dictionary defines the "Federal Reserve System" as, "Network of twelve central banks to which most national banks belong and to which state chartered banks may belong. Membership rules require investment of stock and minimum reserves."

Privately-owned banks own the stock of the Fed. This was explained in more detail in the case of Lewis v. United States, Federal Reporter, 2nd Series, Vol. 680, Pages 1239, 1241 (1982), where the court said:

"Each Federal Reserve Bank is a separate corporation owned by
commercial banks in its region. The stock-holding commercial banks
elect two thirds of each Bank's nine member board of directors."

Similarly, the Federal Reserve Banks, though heavily regulated, are locally controlled by their member banks. Taking another look at Black's Law Dictionary, we find that these privately owned banks actually issue money:

"Federal Reserve Act. Law which created Federal Reserve banks which
act as agents in maintaining money reserves, issuing money in the form
of bank notes, lending money to banks, and supervising banks.
Administered by Federal Reserve Board (q.v.)."

The FED banks, which are privately owned, actually issue, that is, create, the money we use. In 1964 the House Committee on Banking and Currency, Subcommittee on Domestic Finance, at the second session of the 88th Congress, put out a study entitled "Money Facts" which contains a good description of what the FED is:

"The Federal Reserve is a total money-making machine. It can issue
money or checks. And it never has a problem of making its checks good
because it can obtain the $5 and $10 bills necessary to cover its check
simply by asking the Treasury Department's Bureau of Engraving to
print them."

As we all know, anyone who has a lot of money has a lot of power. Now imagine a group of people who have the power to create money. Imagine the power these people would have. This is what the Fed is.

No man did more to expose the power of the Fed than Louis T. McFadden, who was the chairman of the House Banking Committee back in the '30's. Constantly pointing out that monetary issues shouldn't be partisan, he criticized both the Herbert Hoover and Franklin Roosevelt administrations. In describing the Fed, he remarked in the Congressional Record, House pages 1295 and 1296 on June 10, 1932, that:

"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
and he people of the United States out of enough money to pay the
national debt. The depredations and the iniquities of the Federal Reserve
Board and the Federal reserve banks acting together have cost this
country enough money to pay the national debt several times over. This
evil institution has impoverished and ruined the people of the United
States; has bankrupted itself, and has practically bankrupted our
Government. It has done this through the maladministration of that law
by which the Federal Reserve Board, and through the corrupt practices
of the moneyed vultures who control it."

Some people think the Federal reserve banks are United States Government institutions. They are not Government institutions. They are private credit monopolies which prey upon the people of the United States for the benefit of themselves and their foreign customers; foreign and domestic speculators and swindlers; and rich and predatory money lenders. In that dark crew of financial pirates there are those who would cut a man's throat to get a dollar out of his pocket; there are those who send money into States to buy votes to control our legislation; and there are those who maintain an international propaganda for the purpose of deceiving us and of wheedling us into the granting of new concessions which will permit them to cover up their past misdeeds and set again in motion their gigantic train of crime. Those 12 private credit monopolies were deceitfully and disloyally foisted upon this country by bankers who came here from Europe and who repaid us for our hospitality by undermining our American institutions.

The Fed basically works like this: The government granted its power to create money to the Fed banks. They create money, then loan it back to the government charging interest. The government levies income taxes to pay the interest on the debt. On this point, it's interesting to note that the Federal Reserve act and the sixteenth amendment, which gave congress the power to collect income taxes, were both passed in 1913. The incredible power of the Fed over the economy is universally admitted. Some people, especially in the banking and academic communities, even support it. On the other hand, there are those, both in the past and in the present, that speak out against it. One of these men was President John F. Kennedy. His efforts were detailed in Jim Marrs' 1990 book: Crossfire:

"Another overlooked aspect of Kennedy's attempt to reform American
society involves money. Kennedy apparently reasoned that by returning
to the constitution, which states that only Congress shall coin and
regulate money, the soaring national debt could be reduced by not
paying interest to the bankers of the Federal Reserve System, who print
paper money then loan it to the government at interest. He moved in this
area on June 4, 1963, by signing Executive Order 11,110 which called
for the issuance of $4,292,893,815 in United States Notes through the
U.S. Treasury rather than the traditional Federal Reserve System. That
same day, Kennedy signed a bill changing the backing of one and two
dollar bills from silver to gold, adding strength to the weakened U.S.

Kennedy's comptroller of the currency, James J. Saxon, had been at odds with the powerful Federal Reserve Board for some time, encouraging broader investment and lending powers for banks that were not part of the Federal Reserve system. Saxon also had decided that non-Reserve banks could underwrite state and local general obligation bonds, again weakening the dominant Federal Reserve banks.

A number of "Kennedy bills" were indeed issued - the author has a five dollar bill in his possession with the heading "United States Note" - but were quickly withdrawn after Kennedy's death. According to information from the Library of the Comptroller of the Currency, Executive Order 11,110 remains in effect today, although successive administrations beginning with that of President Lyndon Johnson apparently have simply ignored it and instead returned to the practice of paying interest on Federal Reserve notes. Today we continue to use Federal Reserve Notes, and the deficit is at an all time high.

The point being made is that the IRS taxes you pay aren't used for government services. It won't hurt you or the nation to legally reduce or eliminate your tax liability.