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The Crash of the Bank of the United States

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Professor Fekete.com
Extrait des Archives : publié le 29 janvier 2008
1841 mots - Temps de lecture : 4 - 7 minutes
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Rubrique : Université de l'or





Benjamin M. Anderson*


By the fourth quarter of 1930 the trouble with the Bank of United States gave occasion to grave concern.


The Bank of United States was a bank which ought never to have existed, and which certainly ought never to have had the name it had. One leading banker of New York went personally to Albany to protest against the giving of such a name to that bank or to any other bank, and was told that there was a political debt to pay.


In the period 1924 to 1929, with excess reserves and rapid bank expansion, it was easy for plungers and speculators to grow rapidly. There was a heavy discount on sound banking, and a high premium on reckless plunging. One watched it with apprehension, afraid not merely that bankers would lose their judgment but also that in many cases moral standards would crack. In many cases judgment went bad, and in more cases traditional practices, sound and tested, turned out to be bad practices in such an abnormal money markets as then existed. But the great majority of American bankers kept their integrity and tried to adhere to established and approved banking practices. However, it was an era in which the bold speculator and promoter could gain ground rapidly at the expense of the conservative banker, and it was a period in which departures from convention and approved banking practices would seem to be brilliant strokes of genius -- while the new era lasted.


The Bank of United States grew very rapidly down to 1929. The name itself meant, as it was designed to mean, to many of the ignorant people of Europe, that this was the national bank, the state bank, the official bank of the United States. Deposits came to it from a great many of those people and from a great many of the ignorant poor on the East Side of New York. And a great deal of business was brought to it, too, by men engaging in speculative activities who could get the desired accommodation from this bank which other banks of New York would not give.


Loans against mortgages were generally looked upon at askance by great New York banks. The first principle of commercial banking is to know "the difference between a bill of exchange and a mortgage". Second mortgages and third mortgages were notoriously improper documents in a bank's portfolio or as a collateral to its loans. But the Bank of United States went in heavily for these. It had an affiliate also -- the Bankus Corporation. This was engaged in many yet more questionable transactions, including manipulation of the stock of the bank and loans against the stock of the bank. In addition to the utterly unsound banking practices, there were definitely criminal acts for which the head of the bank subsequently went to prison -- not unaccompanied.


When the first mortgages grew shaky, when the second and third mortgages had no market, and when the bank's stock was crashing, the Bank of United States and its affiliate, the Bankus Corporation, were in grave peril. Depositors grew very uneasy and they made heavy withdrawals of funds.


Unsuccessful efforts to save the Bank of United States. The great New York clearinghouse banks, the Federal Reserve bank, and the state superintendent of banking, Joseph A. Broderick (who had no part in giving the name to the bank and whose job was primarily salvage), made strenuous efforts to save the situation. The great clearinghouse banks were prepared, in the interest of preserving the good name of banking in New York, to stand part of the losses. On Monday, November 24, 1930, it was announced that there would be a merger of the Bank of United States with the Manufacturers Trust Company, the Public National Bank & Trust Company, and the Interstate Trust Company, with J. Herbert Case, Federal Reserve agent and chairman of the Board of Directors of the Federal Reserve Bank of New York, as the head of the merger.


This looked like an admirable solution of the problem. The financial community breathed a great sigh of relief when it appeared that J. Herbert Case thought that the situation could be solved in this way. It appeared that the aggregate capital funds of all these banks would suffice to absorb the losses and still leave a strong institution. But the agreement was a contingent agreement, and the other banks were to have time to scrutinize the assets of the Bank of United States. As they did, the merger became impossible. The officials of the other banks and J. Herbert Case could not assume responsibility for such a mess. The problem remained. The clearinghouse continued to work hard upon it.


A conference, lasting beyond midnight, of leading New York bankers sat with superintendent Broderick on the night of December 10 and the early morning of December 11. A plan was worked out by which a wholly new management, under the presidency of the head of one of the small but sound banks of the city, was to take over the Bank of United States with a guaranty of the great clearinghouse banks against loss.


But after this able young president and his associates, accustomed to clean, sound banking, looked at the assets of the Bank of United States, looked at the second and third mortgages, looked at the tangled and involved transactions they would have to deal with, they declined. They just did not know how to do that kind of banking. No other New York bank knew how to do that kind of banking.


And so it came to pass that, on Thursday morning, December 11, 1930, the Bank of United States was closed for good.


Cheap money could not help in a situation like this. To ease the shock and to relieve the plight of the depositors of the bank, the other banks of the city agreed to make loans against deposit accounts in the Bank of United States up to fifty percent of their face value.


With the announcement of the closing of the Bank of United States the stock market plunged still lower. Money remained extraordinarily cheap in this stock market crisis. Call- loan renewal rates ranged from 2 to 2.3 percent between December 13 and December 27. But cheap money could not help in a situation where it was not liquidity but confidence that was vanishing. The stock market reached a wide-open selling climax on Wednesday, December 17. Then, as is usual, it rallied, and the rally carried over through the early months of 1931. But, in the light of developments of the next two years, the American banking system was mortally wounded. By March, 1933, it lay prostrate. One rotten apple can make the entire pile of apples go bad.


* Benjamin McAlester Anderson, 1886-1949, author of the posthumously published treatise Economics and the Public Welfare, A Financial and Economic History of the United States, 1914-46 (Princeton: D.Van Nostrand Co., Inc., 1949; second edition: Indianapolis: Liberty Press, 1979) from which this excerpt was taken, slightly edited by Antal E. Fekete of Gold Standard University.


Editor's comment. Professor Anderson was a distinguished scholar, historian, banker, financier, and economist. As a monetary historian he wrote about a period in which he was not only an astute observer but also a frequent participant.


What lends extraordinary timeliness to his observations about the 1930 banking scene is the now unfolding subprime mortgage crisis that has already metastasized from the United States to the rest of the world. Needless to say, in 1930 the American banks were in a far better shape than they are today when the entire banking system is guilty of unsound practices with which only isolated banks, such as the Bank of United States and the Bankus Corporation, indulged themselves eighty years ago.


Eighty years ago the fancy name of the bank was the lure to entice ignorant people to their doom. Today it is the fancy name of the product: "mortgage-backed securities", "collaterized debt obligations", "securitization of loans" and, most recently, "insuring bonds" that is supposed to do the same trick.


What makes the above reading so frightening is the fact that eighty years ago the credit of the United States was rock-solid. Today it is moth-eaten; the promises of the federal government are hardly worth the paper on which they are printed, in view of its repeated defaults and its embracing of the unconstitutional regime of the irredeemable dollar. Worse still, the credit of other countries is no better, given the fact that it is not backed by anything more solid than the credit of the United States.


Eighty years ago American institutes of higher learning offered the very best available by way of economic and banking knowledge. Today they are a sorry shadow of their former self. They are subject to bribe and blackmail. They are stooges of the banks. There is a gigantic cover-up and distortion of truth, as a consequence of our way of financing advanced studies through grants from the banks, including the twelve Federal Reserve banks, with a hidden agenda to perpetuate the regime of the irredeemable dollar.


If academia is the tamed lion of the banks, then financial journalism is their lapdog.


Eighty years ago one was afraid that moral standards may crack in consequence of questionable banking practices. Today we know that they have. The Bank of United States closed its doors for good on December 11, 1930. But it did not even have off-balance liabilities! Nor did it have nina mortgages! (nina = no income, no assets).


It is interesting to watch the Fed trying to meet the present crisis in the same way as it was in 1930: by administering liberal doses of cheap money. In 1930 the Fed made the crisis worse and it prepared the ground for the Great Depression. Cheap money in 1930 certainly did not stop the decline in the stock market.


Ruefully, one can say of the Fed the same what was once famously said of the Bourbons after the restoration of the monarchy in France: "they've learned nothing and forgotten nothing."



Antal E. Fekete

Professor, Intermountain Institute of Science and Applied Mathematics

Missoula, MT 59806, U.S.A.


DISCLAIMER AND CONFLICTS
THE PUBLICATION OF THIS LETTER IS FOR YOUR INFORMATION AND AMUSEMENT ONLY. THE AUTHOR IS NOT SOLICITING ANY ACTION BASED UPON IT, NOR IS HE SUGGESTING THAT IT REPRESENTS, UNDER ANY CIRCUMSTANCES, A RECOMMENDATION TO BUY OR SELL ANY SECURITY. THE CONTENT OF THIS LETTER IS DERIVED FROM INFORMATION AND SOURCES BELIEVED TO BE RELIABLE, BUT THE AUTHOR MAKES NO REPRESENTATION THAT IT IS COMPLETE OR ERROR-FREE, AND IT SHOULD NOT BE RELIED UPON AS SUCH. IT IS TO BE TAKEN AS THE AUTHORS OPINION AS SHAPED BY HIS EXPERIENCE, RATHER THAN A STATEMENT OF FACTS. THE AUTHOR MAY HAVE INVESTMENT POSITIONS, LONG OR SHORT, IN ANY SECURITIES MENTIONED, WHICH MAY BE CHANGED AT ANY TIME FOR ANY REASON.

Copyright © 2002-2008 by Antal E. Fekete - All rights reserved




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AN ASTOUNDING EXPOSURE

What no one recognizes to this day is that the Fed stole America's gold and shipped it to Germany causing bank runs and the Depression. Later Prof Anthony Sutton describes the Wall St funding of Hitler that also few realize.

House Banking Chairman Louis McFadden (1920-31) called on congress in excerpts in the below speech from the congressional record to join him in the arrest of the Fed for theft and treason.

Congress was scared sh*tless to join him and left him alone to be assassinated two years later on their third attempt.

To this day we have NYT economist Paul Krugman and Ben Bernanke stating the cause of the 30s Depression was the fact that we just didn't print enough
money even though we were on a gold standard and you can't print gold.

Just more deception and disinformation from today's United States of Deception.
Even on alternative sites, this truth has not gotten the recognition it deserves. Most Americans believe the Fed is a government agency benefitting them and no one seems to know the cause of the 30s Depression and the funding of Hitler.

The bank runs of 32-33 were caused by this gold theft from American depositors. Amazing that 80 years later this truth is still not out and a great American hero was killed trying to stop this theft and treason and the cowards in congress let it all happen.

For the full speech see

Louis McFadden - AN ASTOUNDING EXPOSURE

http://www.afn.org/~govern/mcfadden.html

His assassination history

Commenting on Former Congressman Louis T. McFaddens's "heart-failure sudden-death" on Oct. 3, 1936, after a "dose" of "intestinal flue," "Pelley's Weekly" of Oct. 14, 1936 says:

Now that this sterling American patriot has made the Passing, it can be revealed that no long after his public utterance against the encroaching powers of Judah, it became known among his intimates that he had suffered two attacks against his life.

The first attack came in the form of two revolver shots fired at him from ambush as he was alighting from a cab in front of one of the Capital hotels. Fortunately both shots missed him, the bullets burying themselves in the structure of the cab.

"He became violently ill after partaking of food at a political banquet at Washington. His life was only saved from what was subsequently announce as a poisoning by the presence of a physician friend at the banquet, who at once procured a stomach pump and subject the Congressman to emergency treatment."
/s/ Robert Edward Edmondson (Publicist-Economist)

Here's some quotes from McFadden's speech from the congressional record.

On May 23, 1933, Congressman, Louis T. McFadden, brought formal charges against the Board of Governors of the Federal Reserve Bank system, The Comptroller of the Currency and the Secretary of United States Treasury for numerous criminal acts, including but not limited to, CONSPIRACY, FRAUD, UNLAWFUL CONVERSION, AND TREASON.

The petition for Articles of Impeachmentas thereafter referred to the Judiciary Committee and has YET TO BE ACTED ON.
So, this ELECTRONIC BOOKLET should be reprinted, reposted, set up on web pages and circulated far and wide.

Congressman McFadden
on the Federal Reserve Corporation
Remarks in Congress, 1934

AN ASTOUNDING EXPOSURE


Assorted Quotes

"On April 27, 1932, the Fed outfit sent $750,000 belonging to American bank depositors in gold to Germany. A week later another $300,000 in gold was shipped to Germany. About the middle of May $12,000,000 in gold was shipped to Germany by the Fed. Almost every week there is a shipment of gold to Germany. These shipments are not made for profit on the exchange since the German marks are below parity with the dollar.

"Mr. Chairman, I believe that the National Bank depositors of these United States have a right to know what the Fed are doing with their money. There are millions of National Bank depositors in the Country who do not know that a percentage of every dollar they deposit in a Member Bank of the Fed goes automatically to American Agents of the foreign banks and that all their deposits can be paid away to foreigners without their knowledge or consent by the crooked machinery of the Fed and the questionable practices of the Fed.
[Ed. Note- Problem with next paragraph in original] "Mr. Chairman, the American people should be told the truth by their servants in office."


On Roosevelt's anti-hoarding gold law taking the US off the gold standard.

"The Fed lately conducted an anti-hoarding campaign here. They took that extra money which they had persuaded the American people to put into the banks- they sent it to Europe- along with the rest. In the last several months, they have sent $1,300,000,000 in gold to their foreign employers, their foreign masters, and every dollar of that gold belonged to the people of these United States and was unlawfully taken from them."

The London Connection
"the officials in charge of the Fed unwisely gave Great Britain immense gold loans running into hundreds of millions of dollars. They did this against the law! Those gold loans were not single transactions. They gave Great Britain a borrowing power in the United States of billions. She squeezed billions out of this Country by means of her control of the Fed."

"She abandoned the gold standard and embarked on a campaign of buying up the claims of foreigners against the Fed in all parts of the world. She has now sent her bailiff, Ramsey MacDonald, here to get her war debt to this country canceled. But she has a club in her hands! She has title to the gambling debts which the corrupt and dishonest Fed incurred abroad."

"Under cover, the predatory International Bankers have been stealthily transferring the burden of the Fed debts to the people's Treasury and to the people themselves. They the farms and the homes of the United States to pay for their thievery! That is the only national emergency that there has been here since the depression began."

"Do not deceive yourself, Mr. Chairman, or permit yourself to be deceived by others into the belief that Roosevelt's dictatorship is in any way intended to benefit the people of the United States: he is preparing to sign on the dotted line! "He is preparing to cancel the war debts by fraud!

"He is preparing to internationalize this Country and to destroy our Constitution itself in order to keep the Fed intact as a money institution for foreigners. "Mr. Chairman, I see no reason why citizens of the United States should be terrorized into surrendering their property to the International Bankers who own and control the Fed. The statement that gold would be taken from its lawful owners if they did not voluntarily surrender it, to private interests, show that there is an anarchist in our Government.
"The statement that it is necessary for the people to give their gold- the only real money- to the banks in order to protect the currency, is a statement of calculated dishonesty!





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AN ASTOUNDING EXPOSURE What no one recognizes to this day is that the Fed stole America's gold and shipped it to Germany causing bank runs and the Depression. Later Prof Anthony Sutton describes the Wall St funding of Hitler that also few realize.  Lire la suite
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