CHAPTER V

CHECK COLLECTION BANDITRY

YOU have seen the birth of the monster; you have seen how it conscripted its capital at a petty six per cent interest rate; you have seen how it commandeered--at no interest rate--the mightiest mass of deposits ever gathered together on earth and you have seen how it did these things by its absolute control over the money and over the destinies of the National Banks in the United States. It could and it did and it does practically control their affairs.

But it could not--except by intimidation, by oppression or by practical banditry--control the State Banks of the United States. It could not legislate them into its sheep pen for shearing, but it could attempt to intimidate, bulldoze and banditize them. This it attempted to do in this wise:

One of the chief specialties of this Federal Reserve System of applied banditry is to attempt to force every bank in the United States--whether a member of its Shylockery or not--to collect checks for its benefit and advantage for nothing. In other words, where it couldn't conscript nor commandeer--purely for its own sordid profit--it proceeded to bulldoze.

There are just two ways to collect money on checks, one by presenting them at the counter of the bank on which they are drawn and getting the cash and the other by sending them through the mail for remittance by draft drawn on some large city depository. The latter method obtains in 99 per cent of the hundreds of millions of checks drawn. The bank upon which the check is drawn makes a small charge of one tenth of one per cent to compensate for clerk hire, postage, stationery and the like. It is a perfectly legitimate charge in vogue and practiced for generations in banking circles. But the Federal Reserve System, with its customary greed, insists upon sandbagging this service for nothing. This arrogant rule--purely for its own sordid profit--it could and did and does enforce against its conscripted and commandeered National Banks. But State Banks--not wearing the Federal Reserve yoke of bondage--were at liberty to make the usual collection charge of one tenth of one per cent. Thereupon the Federal Reserve System had a series of fits and fell into them. From an enormous number of its banditries three typical ones are selected for your observation--merely straws showing whence blow the most arrogant winds of oppression.

First take a look at the Cones State Bank of Pierce, Nebraska. "I don't want a smug lot of experts to sit down behind closed doors in Washington and play Providence to me." That is what President Wilson said--on page 60 of his book, "The New Freedom"--before he, himself, was sitting tight "behind closed doors in Washington."

That is just exactly how Wood Cones, president of the Cones State Bank of Pierce, Nebraska, feels about a smug coterie of banking oligarchs known as the Federal Reserve Board at Washington and the Federal Reserve Bank at Omaha, Nebraska. First, read the subjoined affidavit about "hard boiled and armed" Federal Reserve Bank agents and then our comments on the whole proposition.

"In the Superior Court of Fulton County, Georgia.

AMERICAN BANK & TRUST CO., et al. vs. FEDERAL RESERVE BANK, et al.

THE STATE OF NEBRASKA } SS. PIERCE COUNTY }

"Personally appeared before the undersigned attesting officer, Wood Cones, who makes this affidavit to be used as evidence in the above stated case and who being first duly sworn deposes and says:

"That I am, and for many years have been, the president of the Cones State Bank of Pierce, Nebraska, and as such officer of said bank, I was interviewed some time last September by a Mr. Jones, claiming to represent the Omaha branch of the Federal Reserve Bank of Kansas City, Missouri. I was urged by him to join the system. I refused and was then asked to sign a card agreeing that my bank would remit all items at par sent us by mail by the Federal Reserve Bank. I refused to sign and was told that I would be compelled to at an early date, as there was no limit to the power of the Federal Reserve Bank.

"Early in October of the same year, the local express agent presented quite a number of checks on our bank from the Federal Reserve Bank and we gave him a draft for the full amount payable to the Federal Reserve Bank. A short time after, another bunch of checks of the same kind came in the same way but the express agent was instructed to collect in cash. I offered him silver dollars for the checks and he said he did not have time to count it and accepted an Omaha draft for the face of the checks.

"Following this, W.S. Lower, claiming to represent the Omaha branch, came with some checks and demanded legal tender in payment. We offered him a draft payable to the Federal Reserve Bank but refused to pay him the currency without better identification than was produced by him. After considerable loud talk and threat to protest the checks he accepted a draft. Shortly after this Mr. Lower came again, properly identified, and demanded cash on checks he had and we refused payment on account of improper and insufficient endorsement. He stormed around for a day and finally accepted a draft payable to the Federal Reserve Bank.

"November 14, 1919, a high powered auto containing four people, drove into Pierce and stopped in front of the Bank, but the engine kept running. Two men, W. S. Lower and M.L. Bishop, got out of the car, armed with revolvers and entered our bank. As agents of the Federal Reserve Bank, they demanded the currency on checks drawn against the Cones State Bank of Pierce, Nebraska, of the aggregate face value of $31,900, some of which had been held for over three weeks. While one of our Bank force was counting out the money (about $13,000 more than we are legally required to carry in our vault) to Mr. Bishop, Mr. Lower told us that Bishop was a United States marshal, hard boiled and armed, and that he had cleaned up the State of Kansas and would get us anyway, so we had better sign up the agreement and keep our money.

"Bishop said that a banker in Kansas who had the only bank in the town, held out against parring, and that he told him they would start a National Bank and drive him out of business, and that he personally was instrumental in starting the National Bank and said he would stick to it until he drove the Kansas bank out entirely.

"Mr. Jones and a Mr. Davis came along later and claimed they were peacemakers direct from the Federal Reserve Bank of Kansas City. Said that Lower and Bishop were ---- fools and had done entirely wrong at Pierce and advised us to forget what Lower and Bishop had done and sign up as the day was near when we would be forced. They took a draft for the checks they had and departed saying that they had enough of this ---- business.

"Subsequently checks were sent through the Express Company and returned by the express agent for the reason as I said that he didn't have time to count the money.

"Along about the 27th day of December, 1919, a Mr. Farley came to Pierce from Kansas City and asked us to sign the paper relative to parring checks or join the Federal Reserve System. We refused. He then stated that he was instructed to stay in Pierce until he had accomplished something. From that date until the day of making this affidavit Mr. Farley has been here continuously and collects cash every day on checks sent him by the Federal Reserve Bank.

"On January 5, 1920, a Mr. J.G. Bryan came in from Kansas City and he and Mr. Farley have been instrumental in trying to start a National Bank at Pierce, devoting practically their entire time collecting cash on checks sent by the Federal Reserve Bank upon banks in Pierce and promoting a National Bank that they will compel the banks of Pierce to join the system. Our customers report to us that these men have told them that we are robbing them out of ten cents on every hundred dollars of their money.

"On or before the 14th day of January, 1920, Mr. Jones joined Mr. Farley and Mr. Bryan and has acted as Notary Public, protesting checks presented by the aforesaid agents of the Federal Reserve Bank of Kansas City, notwithstanding such checks were endorsed on the face 'not payable through the Federal Reserve Bank, their branches or agents, nor Express Company nor Postoffice' and are continuing to protest such checks when we refuse payment of them in their hands and in one case have presented a check a second time and protested it each time.

"Every agent of the Federal Reserve Bank that has been here has advised us in substance that they were spending the Government's money like drunken sailors and will not stop at any expense to force us to join the system.

"One of my competitors told me that Mr. Davis told him in substance that the Federal Reserve Board had a steam roller on the way from Washington to crush me personally and ruin my bank if I persisted in refusal to comply with their demands. I subsequently called Mr. Davis' attention to this report and he personally acknowledged to me that he had made such a statement in substance.

(Signed) "Wood Cones.

"Sworn to and subscribed before me this 10th day of February, 1920.

(Signed) "Douglas Cones.

"Notary Public in and for Pierce County, Nebraska.

"My commission expires September 25, 1925."

The Cones State Bank couldn't be bulldozed, banditized by gun play nor coerced into the Federal Reserve slaughter pen. When the Federal Reserve System grabbed Wood Cones it grabbed a hot wire which it finally dropped, nursing its badly burnt paws!

Now take a look at the Brookings State Bank of Brookings, Oregon. It wouldn't wear the Federal Reserve yoke of bondage and made the customary collection charge of one tenth of one per cent for remitting check collections. It couldn't be bluffed, bulldozed, sandbagged nor coerced and the Federal Reserve System had its usual fit.

On October 8, 1920, it stationed an emissary from the Portland branch of its San Francisco Shylockery at Brookings, Oregon, for the sole purpose of collecting in cash over the counter all checks coming from all over the U.S.A., drawn on the Brookings State Bank--with the avowed object of whipping it into abject surrender. Nothing doing! Daily the Federal Reserve sub-bandit presented himself at the counter with his wad of checks and daily the Brookings State Bank smilingly handed over the cash! The Federal Reserve emissary--pursuant to orders--stuck at Brookings, Oregon, from October 8, 1920, until October 1, 1921, vainly endeavoring to wear down the Brookings State Bank. Positively nothing doing. The Federal Reserve octopus had struck at one bank where its slimy tentacle slipped.

Then this Federal Reserve sandbaggery resorted to the scheme of sending out what it called "notices of dishonor" against the Brookings State Bank, whereupon the Brookings State Bank went into the United States Court and obtained from Judge Wolverton an injunction against such "dishonor notices!" Drawing cash over its counter for over a year couldn't bluff the Brookings State Bank and the United States Court forbade its fictitious "dishonor notice" game! So the octopus tried another method--equally damphoolish but characteristic of its banditry methods.

There lies before us as we write a photographic copy of a "transit slip" made out by the Federal Reserve Bank of San Francisco at its Los Angeles Branch on November 19, 1921. On this "transit slip" is listed a $50 check drawn on the Brookings State Bank of Brookings, Oregon, and over against the item is marked "Bank Closed!" It is as foul a libel as even the Federal Reserve octopus ever spewed from its sac of venom! The Brookings State Bank was never "closed" for the fractional part of a second! In fact it was and is a damsite too "open" to suit the Federal Reserve thuggery!

Now look at the venom spat out by this Federal Reserve octopus at the Brookings State Bank because it wouldn't do its bidding. During the year it kept its emissary there it collected $102,000 in checks. Counting his salary, expenses, expressage of currency and the like, it must have cost it at least $4,000. It could have had precisely the same service for one tenth of one per cent or just $102.

Then when that didn't work it sent out its fictitious "dishonor notices" and bumped into a United States Court injunction!

Then when that didn't work it sent out its lying "Bank Closed" notice on its "transit slip!" And it cowers behind the skirts of a girl clerk in trying to skulk out of this picture of malice. In the meantime the Brookings State Bank held the fort--unshackled by Federal Reserve oligarchy.

Now jump down into the Atlanta Federal Reserve loot area and take a look at its banditry there and read what the United States Supreme Court has to say on this whole thuggery proposition. The method of Federal Reserve thuggery at this point was to hold out and hoard up a mass of checks and present them at one time over the counter of the Atlanta Bank and Trust Company--with the avowed object of crippling it. Here are quotations from the opinion of the United States Supreme Court handing out a solar plexus blow to this Federal Reserve thuggery.

"The plaintiffs are not members of the Federal Reserve System and many of them have too small a capital to permit their joining it--a capital that could not be increased to the required amount in the thinly populated sections of the country where they operate. An important part of the income of these small institutions is a charge for the service rendered by them in paying checks drawn upon them at a distance and forwarded, generally by other banks, through the mail. The charge covers the expense incurred by the paying bank and a small profit. The banks in the Federal Reserve System are forbidden to make such charges to other banks in the System. It is alleged that in pursuance of a policy accepted by the Federal Reserve Board the defendant bank has determined to use its power to compel the plaintiffs and others in like situation to become members of the defendant, or at least to open a non-member clearing account with defendant, and thereby under the defendant's requirements, to make it necessary for the plaintiffs to maintain a much larger reserve than in their present condition they need. This diminution of their lending power coupled with the lose of the profit caused by the above mentioned clearing of bank checks and drafts at par will drive some of the plaintiffs out of business and diminish the income of all. To accomplish the defendants' wish they intend to accumulate checks upon the country banks until they reach a large amount and then to cause them to be presented for payment over the counter or by other devices detailed to require payment in cash in such wise as to compel the plaintiffs to maintain so much cash in their vaults as to drive them out of business or force them, if able, to submit to defendant's scheme. It is alleged that the proposed conduct will deprive the plaintiffs of their property without due process of law contrary to the Fifth Amendment of the Constitution and that it is ultra vires. The bill seeks an injunction against the defendants collecting checks except in the usual way.

"The defendants say that the holder of a check has a right to present it to the bank upon which it was drawn for payment over the counter, and that however many checks he may hold he has the same right as to all of them and may present them all at once, whatever his motive or intent. They ask whether a mortgagee would be prevented from foreclosure because he acted from disinterested malevolence and not from a desire to get his money. But the word (right) is one of the most deceptive of pitfalls; it is so easy to slip from a qualified meaning in the premise to an unqualified one in the conclusion. Most rights are qualified. A man has at least as absolute a right to give his own money as he has to demand money from a party that has made no promise to him; yet if he gives it to induce another to steal or murder the purpose of the act makes it a crime.

"A bank that receives deposits to be drawn upon by check of course authorizes its depositors to draw checks against their accounts and holders of such checks to present them for payment. When we think of the ordinary case the right of the holder is so unimpeded that it seems to us absolute. But looked at from either side it cannot be so. The interests of business also are recognized as rights, protected against injury to a greater or less extent and in case of conflict between the claims of business on the one side and of third persons on the other lines have to be drawn that limit both. A man has a right to give advice but advice given for the sole purpose of injuring another's business and effective on a large scale, might create a cause of action. Banks as we know them could not exist if they could not rely upon averages and lend a large part of the money that they receive from their depositors on the assumption that not more than a certain fraction of it will be demanded on any one day. If without a word of falsehood but acting from what we have called disinterested malevolence a man by persuasion should organize and carry into effect a run upon a bank and ruin it, we cannot doubt that an action would lie. A similar result even if less complete in its effect is to be expected from the course that the defendants are alleged to intend, and to determine whether they are authorized to follow that course it is not enough to refer to the general right of a holder of checks to present them but it is necessary to consider whether the collection of checks and presenting them in a body for the purpose of breaking down the petitioner's business as now conducted is justified by the ulterior purpose in view.

"If this were a case of competition in private business it would be hard to admit the justification of self interest considering the now current opinion as to public policy expressed in statutes and decisions. But this is not a private business. The policy of the Federal Reserve Banks is governed by the policy of the United States with regard to them and to these relatively feeble competitors. We do not need aid from the debates upon the statute under which the Reserve Banks exist to assume that the United States did not intend by that statute to sanction this sort of warfare upon legitimate creations of the States.

"Decree reversed."

The fact is that this Federal Reserve octopus in pursuance of its policy of gun play, banditry and oppression against State Banks--all from the dirtiest motives of pure sordidness--presented one of its tentacles of greed to the Supreme Court of the United States and it was ruthlessly severed! This is but an introduction--a mere curtain raiser--to the greatest drama of greed ever enacted under the guise of law in a civilized land. But here are two things settled by the highest tribunal in the land; first, that State Banks can't be coerced, banditized nor bulldozed by the Federal Reserve System and second, that the Federal Reserve System "is not a private business"--but it is in fact the business of the United States and "is governed by the policy of the United States."