The Federal Reserve plays an important role in the life of every American (and some would argue, every human) but few know of its origins, and the power it wields.
The Creation of the Federal Reserve
On Jekyll Island, off the coast of Georgia, in 1910 the Federal Reserve was conceived. The men (well known and wealthy—see list below) who came up with the Federal Reserve were asked to the meeting on Jekyll Island under great secrecy. No one knew they were there. The meeting took place over nine days, where the men discussed and hammered out the significant details of what would become the Federal Reserve.
Men Who Created the Federal Reserve
- Nelson W. Aldrich
- Abraham Piatt Andrew
- Frank Arthur Vanderlip
- Henry Pomeroy Davison
- Charles D. Norton – President of the First National Bank of New York
- Benjamin Strong – Vice President of Bankers Trust Company
- Paul Warburg – Director of Wells Fargo & Company
Frank Arthur Vanderlip arrange the meeting, and instructed the men to arrive in utmost secrecy, going as far as requesting that they take pre-arranged transport and to only use first names as they made the trip. This was to keep the identity of those who came up with the concept of the Federal Reserve secret. The secrecy was needed so that the public would not know who proposed the creation of the Federal Reserve, otherwise no legislation that created the Federal Reserve Bank would pass Congress.
The Federal Reserve: The Fountain-Head of Money
Despite its name, the Federal Reserve is a completely private organization that works with the government to set the monetary policy in the United States. The primary relationship between the Federal Reserve and the US government is through the Treasury. It issues Federal Reserve currency (electronic money) which is used to purchase treasury bonds and bills—effectively loaning the Federal Government money.
This process is interesting (frightening) because the Federal Reserve basically creates money out of thin air, and lends it to the government. And how does the borrowed treasury get paid back? Well, the governments taxes the working public and businesses to pay for its liabilities.
How Does the Federal Reserve Help the Federal Government
Once the Federal Reserve came into being, it was given the power to create (print) federal reserve notes (money). It can generate money (out of think air) and lend it out to Federal Reserve banks (there are 12) which in turn can either lend it directly to the government (by buying treasury notes) or lending to other banks which then can lend it to the government by buying treasury notes. The treasury notes pay interest and that is how the banks make money, and since the notes are backed by the United States government, the are considered to be safe investments.
The money that the Federal Reserve creates out of think air produced interest, which then the Federal reserve uses to operate, and lend. Whatever is left over is then routed into the US treasury. Most of this money is made from charging the US government interest.
US Government borrows money from the Federal Reserve, the Federal Reserve charges the Federal Government interest, and then pays out the profits of that transaction to the US Treasury. The Federal Reserve system and its members and directors make money by creating something out of nothing, and then charging the US Government for lending it ‘nothing’.
A Comprehensive Video From the Expert on the Subject
Note: George Edward Griffin is the foremost expert on the Federal Reserve, its founding, and consequences of its creation. It is based on his presentations, and expertise that this writing is based.