The Introduction in to the United States Banking System

The Federal Reserve Banking System was created in 1913 after three failed tries to have a national bank from which the Federal government would have control and management of currency. After the United States Constitution was ratified, it was clear to the Founders and Signers that the ‘free market’ was to remain free. Sure, there were uncertainties in the financial system due to America taking a stand on its own terms. Private Banks were in existence for national and international banking services. Due to import and export relationships and treaties, currency and trade suffered from major instability.

A monetary panic occurred in 1907 and those in the Federal government decided it was time to address the United States monetary policy once and for all. President Wilson signed legislation in 1913 making the Federal Reserve a hybrid of a private bank system but controlled and governed by Congress. Paul Warburg, a German born banker gathered five other bankers to decide the blueprint for the national and eventual international banking system. Warburg was a staunch supporter of government control and an international governmental system. Many in Congress wanted the Federal Reserve to be a government controlled entity and others in Congress demanded the system be a de-facto private entity. Warburg was closely tied to J.P. Morgan and John D. Rockefeller, both of extreme wealth. The blueprint was drafted such that the Federal Reserve would be a government controlled banking system within the United States. The plan was later presented to Woodrow Wilson to assign Congress to enact legislation.
Later in 1944, allied nations met under the invitation of those in the Federal Reserve to meet in New Hampshire to discuss and model yet another national and international monetary system for the sake of a world trade policy. The objective was to regulate monetary relations, flow of trade and cost fluctuations due to unstable credit fears. The summary of this meeting was to attach the currency to a gold standard for a reserve value on money. At this time, the International Monetary Fund (IMF) was also established.
As world markets became more viable and profitable, once again, more fears and strains were realized in the cost of credit and currency exchanges. It was in 1971, the financial system essentially imploded yet once again, and President Nixon took the United States currency off the gold standard. The result of this action was to tie the U.S. currency to a fluctuating value within the world currency market as the new reserve policy. Since that time, there have been fifteen additional Federal laws enacted relating to the Federal Reserve. “The Federal Reserve regularly reports to Congress about its activities and plans for monetary policy. Although Congress has the power to change the laws governing the Fed and its operations, the central bank’s day-to-day policy and operational decisions do not require Congressional or Presidential approval.” http://www.frbsf.org/publications/federalreserve/fedinbrief/organize.html
Today, the Federal Reserve has twelve Districts, or regions, throughout the United States. Regional headquarters are located in Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas, and San Francisco. Additionally, there are Branches of Reserve Banks in 25 other cities. “National banks chartered by the federal government are, by law, members of the Federal Reserve System. State-chartered banks may choose to become members of the Federal Reserve System if they meet the standards set by the Board of Governors. Each member bank is required to subscribe to stock in its regional Federal Reserve Bank, but holding Federal Reserve stock is not like holding publicly traded stock. Reserve Bank stock cannot be sold, traded, or pledged as collateral for loans. As specified by law, member banks receive a six percent annual dividend on their Federal Reserve Bank stock; member banks also vote for Class A and Class B directors of the Reserve Bank.”
http://www.frbsf.org/publications/federalreserve/fedinbrief/organize.html
The Federal Reserve through its Board of Governors has established all the monetary policy, all the banking information standards, regulations, payment systems and standardized forms. The Federal Reserve also controls interest rates, exchange rates, public and private and consumer credit laws as well as matters as they relate to securities within the Securities and Exchange Commission.
The Federal Reserve issues stock to member banks yet the Federal Reserve is a not for profit organization. The stock may not be sold or traded for collateral of loans. Dividends are paid to member banks but are limited to six percent per year. Member banks must maintain a uniquely determined monetary reserve in Federal Reserve deposits.
Reported the end of the year for 2009, the Federal Reserve had total deposits of $2.23 trillion dollars, with the largest district Federal Reserve bank being New York with a reserve deposit of $1.14 trillion. Congress requires all cabinet departments to report performance and compliance results but does not require the Federal Reserve to comply with any government performance standards.
http://www.federalreserve.gov/boarddocs/rptcongress/default.htm#arprev
The Federal Reserve is responsible for all oversight on the national and international monetary system and through its Board member banks and directors has written and published banking mandates, rules guidelines to ensure compliance. http://www.federalreserve.gov/boarddocs/supmanual/
Bank examiners visit banks of all disciplines on a regular basis to ensure compliance to countless procedures, laws, accounting, human resources, valuations, credit regulations and more. http://www.federalreserve.gov/newsevents/press/monetary/20091005b.htm It is difficult to define policy and procedures or even organizational standards within the banking system, as they do exists, but banks cannot function outside the scope of the Federal Reserve, however banking laws and rule continue to change based on Congressional legislation and State legislation. Additionally the banking industry has recently come under fire as a result of another financial system failure, thus many banks received bailout money from the Federal Reserve to keep the system solvent and functional. Two other quasi-banking loan government corporations have affected the private and interstate banking systems due to toxic loans, fiat monetary accounting and foreclosures, those two corporations are Fannie Mae and Freddie Mac. Due to the financial system failure of recent years, all banking and regulatory guidelines and rules have changed for all segments of the national currency system as well as the international monetary system. http://www.guardian.co.uk/business/2008/mar/18/useconomy.marketturmoil
The Federal Reserve has and the United States financial system continues to experience instability especially since there is no tangible or steady reserve or standard to support the value of the currency. Since 1913, there has been no real free-market approach to allow a free system to dictate the value and stability of the currency. Congress and each Federal Reserve district office along with member banks have a long history of manipulating the credit markets, the trade system, the interest rates, performance standard and procedures. The United States and the world banks have forged and un-forged relationships in an effort to gain an edge over solving credit and deposit fears.

In summary the Founders had some very stern positions on having a quasi-government controlled banking system. ‘In 1835, President Andrew Jackson declared his disdain for the international bankers: – “You are a den of vipers. I intend to rout you out, and by the Eternal God I will rout you out. If the people only understood the rank injustice of our money and banking system, there would be a revolution before morning.”’
http://www.apfn.org/APFN/reserve2.htm
1787: During the federal convention, Roger Sherman made the statement that: “no Government has a right to impose on its subjects any foreign currency to be received in payments as money which is not of intrinsic value: unless such Government will assume and undertake to secure and make good to the possessor of such currency the full value which they oblige him to receive it
for.” http://www.apfn.org/APFN/reserve2.htm
“All the perplexities, confusion and distresses in America arise not from defects in the constitution or confederation, nor from want of honor or virtue, as much from downright ignorance of the nature of coin, credit, and circulation.” – John Adams http://www.apfn.org/APFN/reserve2.htm