CHAPTER XIII

THE CAMOUFLAGE OF THE MONSTER

DON'T check your brains at the portals of the Federal Reserve "Bunking" System. That is what its touters and ballyhooers want you to do. Federal Reserve bureaucrats and its beneficiaries and its hirelings and an artfully subsidized press have really put the "prop" in propaganda.

They would have you believe--and literally hundreds of columns of inspired writings have been used to make you believe--that the Federal Reserve System is composed of twelve independent Federal Reserve Banks, each one especially devoted to fostering industry in its own regional territory.

Such is not the fact. The fact is that the Federal Reserve System is in truth a huge Central Bank, managed, manipulated, directed and operated from Washington by the Federal Reserve Board. There sits the spider and there the web is woven--spreading all over the U.S.A.--in which are enmeshed the victims.

You can read--if you want to waste your time--oodles of language about how the Boards of Directors of these twelve Federal Reserve Banks are seated in office and how part of them are elected by member banks and how part of them are appointed by the Federal Reserve Board. You can--if you want to waste more of your time--absorb messes of artfully worded verbiage about the duties of the Boards of Directors. But it's all "gammon and spinach," it's all artful camouflage. _The real government of the Federal Reserve Banking System and of its twelve Federal Reserve Banks and branches is in the absolute dictatorial control of the Federal Reserve Board at Washington._ It is all contained in one little joker of just thirty words. Here it is. Read it. "_Any compensation that may be provided by Boards of Directors of Federal Reserve Banks for directors, officers or employees shall be subject to the approval of the Federal Reserve Board._" In every one of the twelve Federal Banks every director, every Governor, every one of the Deputy Governors, Federal Reserve Agents, Cashiers, Assistant Cashiers, Controllers, Secretary, Counsel, Assistant Counsel, Clerks, Stenographers, Messengers and Watchmen--in short, the whole horde of Federal Reserve bureaucratic parasites--are subject to the approval of the Federal Reserve Board at Washington because _their compensation is subject to the approval of the Federal Reserve Board_. You know that the hands that hold the money rule the enterprise. You know that approval or disapproval of compensation is in effect "hiring and firing." You know that "approval of compensation" is simply a euphonious bit of language or smoke screen behind which really sits an enthroned autocracy. No matter how many "conferences" are held between Governors of Federal Reserve Banks, between Federal Reserve Agents and with the Federal Advisory Council--"conferences" which during 1921 cost you $22,716--the Federal Reserve Board at Washington is the supreme and final dictator of the personnel and of the pay of its 10,313 employees and of its 231 officers. The Federal Reserve Board as to the compensation of this horde--and hence as to its personnel--is an absolute autocracy from whose order there is no appeal! It draws its expense account from a practically bottomless treasury without let, hindrance, supervision or veto! Kaiserdom and Czardom in their palmiest days drew from no such lake of liquid gold as draws the Federal Reserve Board at Washington. Set that down on your mental tablets and proceed to the next camouflage station.

Here it is. Federal Reserve propaganda--with a practical limitless expense account to further it--would have you believe that its favored coterie of 231 officials are top notch bankers. Take a look at this as it really is. The bankers whom you know and with whom you do your business and to whom you entrust your money and from whom you borrow your money have taken their own money and the money of their associates and contributed the capital of their banks and put it at risk. They wager their own money that they are good bankers. They have initiative and confidence in their own ability and they prove that they have by putting up their own money before they ask you to entrust yours to their keeping. The officers of the Federal Reserve Banks don't put up a copper cent, a plugged nickel, or a thin dime of capital. The capital which they manipulate is commandeered by law for their use at a petty six per cent rate. They may charge--and they have charged--as high as eighty-seven per cent in one of their Shylockeries, but six per cent is all that those who furnish the capital can claim. In 1919 the Federal Reserve System sandbagged out of other people's money a profit of 110 per cent, in 1920 160 per cent and in 1921 79 per cent. In 1919 its stockholders received 104 per cent less than their capital really earned, in 1920 154 per cent less than their capital really earned, and in 1921 73 per cent less than their capital really earned. For the three years of 1919, 1920 and 1921 the average net profits of the Federal Reserve System were 116 per cent and the real owners of the capital were gypped legally--but none the less gypped--out of an average of 110 per cent for each of those three years. Do you suppose that officers of any bank not legally so buttressed could "get away" with any such proposition? You know they couldn't--and hold their jobs. No body of stockholders in the U.S.A., unless legally chained, would endure a profit of 116 per cent and a dividend of but 6 per cent! And no bank officers in the U.S.A., unless legally permitted, would attempt to "put over" any such proposition. You know it. Peg that and proceed to the next proposition.

What is the absolute, final and unquestionable test of a good banker, a real top notcher in his business? It is the volume of deposits which he attracts. That is the ultimate test of his ability and integrity--the confidence he inspires in his institution as measured by the volume of money entrusted to it! That volume of deposits must be obtained, retained and increased in the face of the hottest kind of hot competition. It is the absolute ability and integrity meter of a successful banker. There is no other. Are these strutting, preening, vociferating and vociferous Federal Reserve bankers measured--or measurable--by that standard? Do they battle for their deposits and by those deposits and the volume of them win their spurs? They do not. Their mass of deposits--the largest on earth--are dumped into their banks by law, conscripted into their coffers. They are not won in competition. Federal Reserve bankers don't prove their ability by competition--they smugly admit it. At this writing over $1,800,000,000 of deposits are in their coffers, conscripted there as were soldiers in the World War by law!

And not only that, but that vast mass of deposits--the hugest on earth--is handed to them free of interest charge. All other banks in large American cities not only compete with each other for the deposits of country banks, but pay interest on them at a minimum of 2 per cent per annum. Federal Reserve bankers pay no interest--not even to the Government. If a National Bank wants Government deposits it must put up the unquestioned security to get them and then must pay interest on them, but Federal Reserve bankers do neither! Not much competition for Federal Reserve bankers there, is there? Peg that proposition and look at the next one.

Here it is. The loans of a bank are the life of a bank. From the interest upon them comes practically the sole earnings of a bank and upon their repayment depends the solvency of a bank. The credit department of a bank is its solar plexus. Loans must be successfully made to men engaged in every variety of industry, some secured, some unsecured and in amounts varying from a few hundreds of dollars to hundreds of thousands of dollars. In May, 1922, the loans and discounts of the National City Bank of New York amounted to $506,840,494--larger by over $200,000,000 than all the "earning assets" of the Federal Reserve Bank of New York. But there is a greater difference than even in these figures and here it is. The bulk of the loans of the Federal Reserve System are made to its member banks and require very slight, if any, credit ability. The bulk of the people in the U.S.A. are loaning money to banks--when they make their deposits--without interest and unsecured, while the Federal Reserve System is engaged largely in making loans to banks at rates up to 87 per cent and mostly secured at that! In other words, what the bulk of the people of the U.S.A. do who are bank depositors is to loan banks money for nothing or at a very low rate of interest and unsecured, while the Federal Reserve System loans the banks money often at altitudinous rates and often secured at that! Or to put it another way, Federal Reserve bureaucracy draws fabulous profits for doing practically for the banks what the people of the U.S.A. are daily doing for nothing!

Sum up some of these differences between National and State Banks and Federal Reserve parasitism.

National and State bankers put up their own capital and risk their own money. Federal Reserve bankers commandeer their capital and risk not a penny of their own.

National bankers make practically over a large term of years about 12 per cent net profits and Federal Reserve bankers make the most fabulous profits ever registered on bank ledgers--during the three years last past an average of 116 per cent.

National and State bankers earn their deposits in the hottest kind of competition. Federal Reserve bankers conscript their deposits--without a scintilla of effort.

National and State bankers pay interest to the Government for Government deposits and give security besides. Federal Reserve bankers pay no interest and give no security for Government deposits.

National and State bankers pay interest upon deposits of other banks. Federal Reserve bankers do not pay any interest.

The capital of National Banks is commandeered into the capital of Federal Reserve Banks at a petty six per cent and their reserve deposits are conscripted at no per cent and then they are graciously permitted to borrow their own money at altitudinous rates!

Which are really the better and more necessary bankers--the National and State bankers or the Federal Reserve System of parasitical camouflage? Which is the more necessary, the National and State bankers close to the people, bearing the risk at petty profits or the Federal Reserve bankers distant from the people bearing practically no risk but reaping profits which would make Shylock frenzy with envy?

Isn't the Federal Reserve System as now constituted and as now administered really a Federal Reserve "Bunking" System astutely camouflaged, smoke screened by artful propaganda and by legalized privilege and favoritism? Isn't it in truth and in fact a commandeering and conscripting monster of finance, politically manipulated, with the most extravagant salaries, buildings, expense accounts and the most fabulous profits in all human history?