IN October 1907, the United States experienced a near-collapse of the banking system that came to be known as the “Panic of 1907.” Similar to twenty-some years later, it was caused by the banks loaning too much money to buyers of a particular stock market issue—United Copper Co.
However, the bank runs and failures, as well as corporate bankruptcies, were limited to the New York City area. Actually one other bank was affected, the State Savings Bank of Butte Montana, which was owned by the same person who owned United Copper Co. and the brother of the man whose stock manipulation caused the “Panic of 1907.”
When banks loan money to buy shares and the share price collapses for whatever reason, the banks face a liquidity crisis, which, in turn, causes a depositor run on the bank, which creates a greater liquidity crisis. While many financial institutions died from their own mismanagement in 2007 and 2008, the US did not experience a catastrophic bank run because of the US Federal Reserve.
The Panic of 1907 ended when John Pierpont (JP) Morgan Sr. put together a deal with the government and other wealthy industrialists and financiers like John D. Rockefeller. The next bank in New York to face a depositor pullout, and that was also financially sound otherwise, would be funded with deposits to provide enough cash to pay all worried depositors. The bank runs ended and the panic was abetted. In the aftermath came the formation of the US Federal Reserve.
In 1994, author G. Edward Griffin wrote a book—The Creature from Jekyll Island—that describes how the creation of the US Federal Reserve was a plot to build an instrument for the banking cartel to control the US economy and government. Griffin never met a conspiracy theory that he did not love and could make money from promoting. He asserts that cancer is caused by a lack of amygdalin in the diet, sort of like a vitamin C deficiency, causing scurvy. He denies that the human immunodeficiency virus exists and that acquired immune deficiency syndrome is actually caused by the antiretroviral drugs used to treat AIDS patients.
The bankers proposed the Federal Reserve System to be a bank-funded “central bank” to provide funding to avoid another liquidity panic of 1907. Twelve Federal Reserve Banks were to be set up around the nation to provide local bank liquidity as necessary. The original design of the Fed was to be private, for banks were to contribute to fund their own bailouts.
The election of Democrat Party candidate Woodrow Wilson to the presidency in 1912 and Democrat control of both the Senate and the House of Representatives saw the Fed removed from the hands of those “evil bankers” and made a part of the government.
From a local “financial fire department,” the Fed became a taxpayer-funded central bank with immense economic and money power that is controlled by the government. The Republican Party—supposedly owned by the bankers—was virtually unanimous in opposition, anticipating exactly what the Fed has become: a taxpayer paid bailout fund and unlimited profit making machine for the banks.
Because of the Fed mandate and objectives—written by politicians—it has become one of the most powerful political tools ever developed. In fact, it is probably right behind throwing your political opponents into a swimming pool filled with piranhas.
The first major central bank—the Bank of England—was established in 1694 as a private entity to gather funds to loan to the government and to control the issuance of money. Central banks were a great idea until the government took control.
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