A WorldNetDaily story reports that the bill sponsored by Rep. Ron Paul (R-TX) that would call for an audit of the Federal Reserve has been “gutted” in a congressional committee. The legislation, H.R. 1207, would also close loopholes that prevent transparency of Fed actions. It currently has over 300 co-sponsors in the House.

In a telephone interview with a Bloomberg reporter, Paul said that the bill had been stripped of measures closing loopholes that protect the Fed and blamed Rep. Melvin “Mel” Watt (D-NC), chairman of the House Financial Services Committee’s Subcommittee on Domestic Monetary Policy and Technology, for ripping the teeth out of the legislation. Watt has significant ties to the banking industry and received the largest share of his 2008 campaign contributions—over one-third of his total contributions for the cycle—from the finance, insurance, and real estate industry. Watt’s four largest contributors were Bank of America, headquartered in Watt’s district in Charlotte, Wachovia Corp., American Express, and the American Bankers Association.

Paul vowed to try to restore the gutted provisions of the bill through an amendment when it comes to the House floor for a vote.

The veil of secrecy that shrouds the Fed has only made it more mysterious, and monetary policy that much more complex and obscure, to the average American taxpayer. Political discourse over subjects like deficits and inflation tends to focus on fiscal policy, but this is only one half of the equation. It is time for more people to ask why the Fed should have a government-granted monopoly for the creation of money and what it does with its powers to alter the value of money and interest.

Below is an excerpt of the WND article quoting Rep. Paul on some of his criticisms of the Fed:

Paul long has been a critic of the secrecy of the Federal Reserve.

“Throughout its nearly 100-year history, the Federal Reserve has presided over the near-complete destruction of the United States dollar,” he said earlier. “Since 1913, the dollar has lost over 95 percent of its purchasing power, aided and abetted by the Federal Reserve’s loose monetary policy.”

“Since its inception, the Federal Reserve has always operated in the shadows, without sufficient scrutiny or oversight of its operations,” Paul said when the plan to audit the Fed was introduced. “While the conventional excuse is that this is intended to reduce the Fed’s susceptibility to political pressures, the reality is that the Fed acts as a foil for the government. Whenever you question the Fed about the strength of the dollar, they will refer you to the Treasury, and vice versa. The Federal Reserve has, on the one hand, many of the privileges of government agencies, while retaining benefits of private organizations, such as being insulated from Freedom of Information Act requests.”

Paul has warned, “The Federal Reserve can enter into agreements with foreign central banks and foreign governments, and the GAO is prohibited from auditing or even seeing these agreements. Why should a government-established agency, whose police force has federal law enforcement powers, and whose notes have legal tender status in this country, be allowed to enter into agreements with foreign powers and foreign banking institutions with no oversight? Particularly when hundreds of billions of dollars of currency swaps have been announced and implemented, the Fed’s negotiations with the European Central Bank, the Bank of International Settlements, and other institutions should face increased scrutiny, most especially because of their significant effect on foreign policy. If the State Department were able to do this, it would be characterized as a rogue agency and brought to heel, and if a private individual did this he might face prosecution under the Logan Act, yet the Fed avoids both fates.”

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by Gary North

The heart of the modern monetary system is fractional reserve banking. This system is based on fraud. At the very heart of the modern economy is fraud – fraud on a gigantic scale.

What is the nature of this fraud? Counterfeiting. Banks are government-licensed institutions that issue bogus IOUs. Because these IOUs function as money, they are counterfeit money. This is the heart, mind, and soul of all modern banking.

There is only one textbook in money and banking that states explicitly that all fractional reserve banking rests on fraud: Murray Rothbard’s The Mystery of Banking. It is not used in any university. It never has been. It was published in 1983. It went out of print almost immediately. It is on-line here.

Rothbard takes the reader through the traditional T-account exercise that is common to all upper-division textbooks in money and banking. Unlike all the others, his book shows how the process of making deposits and lending the money involves counterfeiting whenever the depositor has the legal right to withdraw his money on demand.

This is not the same as a life insurance contract in which you can borrow against your built-up reserves. The company treats the policy-holder as it would treat another borrower. It raises money to make the loan.

The withdraw-on-demand banking process has the same effect as counterfeiting gold and silver coins by adding base metals (pp. 48–51). It has the same effect as issuing paper money that has no backing in gold or silver (pp. 51–55). It has the same effect as issuing warehouse receipts for goods stored for which there are no goods stored (pp. 88–90).

The banking system issues multiple IOUs to depositors and borrowers, yet these IOUs are based on the same initial deposits. Traditional textbooks describe this process, but they refuse to identify the process as counterfeiting. They also refuse to mention that this process of monetary inflation is the sole basis of all booms and busts: the business cycle. This was Ludwig von Mises’ insight as far back as 1912 in his book, The Theory of Money and Credit.

Rothbard makes it clear why fractional reserve banking is fraudulent. This is why no professor assigns his book to his classes.

The irresistible temptation now emerges for the goldsmith or other deposit banker to commit fraud and inflation: to engage, in short, in fractional reserve banking, where total cash reserves are lower, by some fraction, than the warehouse receipts outstanding. It is unlikely that the banker will simply abstract the gold and use it for his own consumption; there is then no likelihood of ever getting the money should depositors ask to redeem it, and this act would run the risk of being considered embezzlement. Instead, the banker will either lend out the gold, or far more likely, will issue fake warehouse receipts for gold and lend them out, eventually getting repaid the principal plus interest. In short, the deposit banker has suddenly become a loan banker; the difference is that he is not taking his own savings or borrowing in order to lend to consumers or investors. Instead he is taking someone else’s money and lending it out at the same time that the depositor thinks his money is still available for him to redeem. Or rather, and even worse, the banker issues fake warehouse receipts and lends them out as if they were real warehouse receipts represented by cash. At the same time, the original depositor thinks that his warehouse receipts are represented by money available at any time he wishes to cash them in. Here we have the system of fractional reserve banking, in which more than one warehouse receipt is backed by the same amount of gold or other cash in the bank’s vaults. It should be clear that modern fractional reserve banking is a shell game, a Ponzi scheme, a fraud in which fake warehouse receipts are issued and circulate as equivalent to the cash supposedly represented by the receipts (pp. 96–97).

Modern economists do not acknowledge that fractional reserve banking is a gigantic system of counterfeiting. They do not apply the same analysis to fractional reserve banking that they would apply to counterfeiting if they discussed counterfeiting. They rarely discuss counterfeiting. This is because they know that bright students can make the analytical connection. The students will be tempted to conclude what is in fact the case, namely, that fractional reserve banking is a form of counterfeiting.

BORROWED SHORT AND LENT LONG

The banker offers a deal to holders of currency. (Prior to 1914 in Europe and prior to 1933 in the United States, the public held gold coins.) Here is the offer.

If you will deposit your money in my bank, I will lend it out at interest. I will share some of this interest with you by guaranteeing you a fixed rate of return.

So far, so good. But then comes the kicker. Furthermore, I will pay you your money on demand during banking hours. Any time you want your currency back, just come to the bank and take it out – no questions asked (unless you try to take out $10,000 or more).

The banker knows what the economics professor knows: almost no one can think through the implications of this promise. Both the banker and the professor of money and banking strive to keep people in the dark. They promote the mystery of banking.

What are a few implications? Here is one. When the bank lends money to a borrower at a fixed rate of return, it lends for a specific period of time (commercial loans) or else no deadline (credit card loans). It cannot get this money back on demand. Yet it owes money on demand.

The depositor can demand immediate payment. Yet the money is gone. The bank has therefore issued two IOUs to the same deposit. The depositor can pull out his money at any time. The borrower, who has the money sitting in his account, can do the same thing.

How is this possible? Because the government or the central bank allows the bank to set aside a small percentage of reserves on the deposit. The bank does not have to keep 100% of the on-demand money in reserve.

With a 10% reserve requirement, if a bank gets a $100 deposit and sends $10 to the central bank as a reserve, it can legally lend $90. When the borrower spends this $90, the receiving bank sets aside $9 and lends $81. The initial $100 deposit leads to $900 in new money, if banks lend all of the money they are legally allowed to lend.

If the banker had added the following statement, there would be no fraud. There would be no counterfeiting.

You will not be able to get your money back on demand until the contract runs out for the borrower. As he repays interest, you will get your share. If he refuses to repay, I will pay you your principal based on bank reserves. But, of course, if the bank goes bankrupt, you will not be repaid.

This offer would make it clear to the depositor that there is no such thing as a free lunch. He cannot get the return of his money until the bank gets it back from the borrower. The same deposit still serves as money: for the borrower, not for the depositor.

The banker makes the offer of payment on demand because he knows that few depositors will demand their money most of the time. Those who do demand their money can be paid out of the money deposited by today’s depositors. Is this a Ponzi scheme? In part, yes. It is a Ponzi scheme that can go on much longer, because the bank possesses the power to create money.

The bank has borrowed short – “withdraw the money on demand” – and has lent long: “pay the money back on time.” This is fraudulent.

CONTRACTS OVER TIME

All contracts have a time component. A contract is a promise to perform an action in the future.

What about an exchange that is instantaneous? In the most radical form, a seller of money holds out a wad of currency. A seller of a good holds out the good. Each of them takes hold of both items, using different hands. On the count of three, each person releases the item he is offering to the other. Each person hopes the other will turn lose of the item on three.

Yet even here, there is a time component. Each participant promises to let loose on the count of three. If there were no agreement – either formal or implied – there would be no exchange.

A contract that promises to do the impossible is fraudulent. If it is part of a series of identical contracts, only a few of which can be consummated on the same day, then all of the payment-on-demand contracts are fraudulent. The creditor cannot distinguish his claim from all the others, other than by “first come, first served.” That principle encourages bank runs.

Whenever a prospective depositor goes down to the bank to make a deposit, he should sing to himself the song that every fractional reserve bank has as its anthem regarding its depositors, who are its creditors. The banker silently sings to every depositor:

Well, that’ll be the day, when you say goodbye.
Yes, that’ll be the day, when you make me cry.
You say you’re gonna leave, you know it’s a lie.
‘Cause that’ll be the day when I die.

This is the chorus. But those of us from the late 1950’s remember what followed.

Well, you give me all your lovin’ and your turtle dovin’
All your hugs and kisses and your money too.
Well, you know you love me baby
Until you tell me, maybe
That some day, well, I’ll be through.

Fractional reserve banking may be a mystery, but Buddy Holly has provided the key to understanding the system.

Bankers woo depositors with promises of everlasting commitment. The proof of this everlasting commitment is the promise of withdrawal on demand. Then they take the depositors’ money to woo borrowers with promises of what would otherwise have been below-market interest rates. Why below market? Because depositors have been lured into parting with their money by means of a promise – a promise that cannot be fulfilled because of the time discrepancy between borrowing short (depositors’ accounts) and lending long (borrowers’ accounts).

The basis of this monetary philandery is the discrepancy between the rival promises of time.

To understand modern banking, think of a full-time philanderer with one mid-town apartment, four mistresses, and three keys. We can call this a 25% reserve requirement. Three mistresses live in the suburbs. His favorite lives in mid-town. One key is for him; one is for the mid-town girl; and one is for the other three mistresses. This key is kept on reserve at the desk downstairs. He assumes that out-of-towners will not all show up on the same day at the same time.

This plan works until a rumor gets out about the nature of the arrangement. Then all three out-of-towners show up to make sure they have a key.

INFLATION AND BAD INFORMATION

Counterfeiters increase the money supply. This is inflationary. They defraud holders of the non-counterfeit currency. How? By lowering the market price of the currency already in circulation. The slogan is: “More money chasing the same amount of goods.”

But, as Mises showed, there is more to it than this. The added money, when lent to producers, leads to a transfer of wealth to the producers. They start bidding for production goods: land (including raw materials), labor, and capital (land plus labor over time). The can make higher bids. They supply goods and services to match expected demand. This creates an economic boom. But when the counterfeiters stop counterfeiting, expected demand does not appear. This creates a bust.

Counterfeit money distorts information. How? Because prices convey information. Prices should convey accurate information. When decision-makers have accurate information, they can find ways to lower the transaction costs of their decisions. They can search out better ways to cut expenses. They can become more efficient.

When prices convey inaccurate information, individuals find that they make more mistakes. They make decisions in terms of information that is misleading. This is why prices should be based on decentralized decisions in which individuals making the decisions are responsible for the outcome of their actions. This is the defense of free-market capitalism. But, when it comes to banks, the economists refuse to follow the logic of this principle of individual responsibility and performance. Defenders of central banking and fractional reserve banking are necessarily defenders of inaccurate information.

CENTRAL BANKING

A central bank provides emergency money to commercial banks. This reduces the threat of bank runs. Central banks intervene to save large banks. This is why no large American bank went bust in the Great Depression, while over 6,000 small banks did.

Central banks are the enforcing arm of the fractional reserve banking system. Central banks determine which banks survive and which do not in a national bank run. Their job is to protect the largest commercial banks. This is a form of central planning by a government-licensed monopolistic agency.

When central planners substitute their judgment for individual decision-makers, we see a centralization of power over the market. The terms of exchange are not being set by individual participants who are responsible for their actions. The terms of exchange are being set by a distant committee. They are immune from negative feedback for their own decisions.

This arrangement is guaranteed to reduce the accuracy of information that is conveyed by prices. Furthermore, when the intervention in question relates to the control of the money supply, we can be certain that the information conveyed by the decision of the committee will be less accurate than the information conveyed by individual decision-makers.

Fractional reserve banking creates blindness. Central banking extends this blindness.

Any economy that relies on fractional reserve banking is flying partially blind. This blindness becomes permanent when a central bank protects large commercial banks that are regarded as too big to fail.

CONCLUSION

Fractional reserve banking is inherently fraudulent. It inflates the money supply. It creates the boom-bust cycle. Through central banking, it transfers planning authority to bureaucrats with only an indirect stake in the outcome of their decisions.

It is the basis of the modern economy. The booms and busts get worse. The dollar depreciates. Central planning increases. Information becomes more distorted.

This will end badly. Worse, it may start over again.

October 10, 2009

Gary North [send him mail] is the author of Mises on Money. Visit http://www.garynorth.com. He is also the author of a free 20-volume series, An Economic Commentary on the Bible.

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1. Is the Internal Revenue Service (“IRS”) an organization within the U.S. Department of the Treasury?

Answer:  No.  The IRS is not an organization within the United States Department of the Treasury.  The U.S. Department of the Treasury was organized by statutes now codified in Title 31 of the United States Code, abbreviated “31 U.S.C.”  The only mention of the IRS anywhere in 31 U.S.C. §§ 301‑310 is an authorization for the President to appoint an Assistant General Counsel in the U.S. Department of the Treasury to be the Chief Counsel for the IRS.  See 31 U.S.C. 301(f)(2).

At footnote 23 in the case of Chrysler Corp. v. Brown, 441 U.S. 281 (1979), the U.S. Supreme Court admitted that no organic Act for the IRS could be found, after they searched for such an Act all the way back to the Civil War, which ended in the year 1865 A.D. The Guarantee Clause in the U.S. Constitution guarantees the Rule of Law to all Americans (we are to be governed by Law and not by arbitrary bureaucrats).  See Article IV, Section 4.  Since there was no organic Act creating it, IRS is not a lawful organization.

1. If not an organization within the U.S. Department of the Treasury, then what exactly is the IRS?

Answer:  The IRS appears to be a collection agency working for foreign banks and operating out of Puerto Rico under color of the Federal Alcohol Administration (“FAA”).  But the FAA was promptly declared unconstitutional inside the 50 States by the U.S. Supreme Court in the case of U.S. v. Constantine, 296 U.S. 287 (1935), because Prohibition had already been repealed.

In 1998, the United States Court of Appeals for the First Circuit identified a second “Secretary of the Treasury” as a man by the name of Manual Díaz-Saldaña.  See the definitions of “Secretary” and “Secretary or his delegate” at 27 CFR 26.11 (formerly 27 CFR 250.11), and the published decision in Used Tire International, Inc. v. Manual Díaz-Saldaña, court docket number 97‑2348, September 11, 1998.  Both definitions mention Puerto Rico.

When all the evidence is examined objectively, IRS appears to be a money laundry, extortion racket, and conspiracy to engage in a pattern of racketeering activity, in violation of 18 U.S.C. 1951 and 1961 et seq. (“RICO”).  Think of Puerto RICO (Racketeer Influenced and Corrupt Organizations Act);  in other words, it is an organized crime syndicate operating under false and fraudulent pretenses.  See also the Sherman Act and the Lanham Act.

1. By what legal authority, if any, has the IRS established offices inside the 50 States of the Union?

Answer:  After much diligent research, several investigators have concluded that there is no known Act of Congress, nor any Executive Order, giving IRS lawful jurisdiction to operate within any of the 50 States of the Union.

Their presence within the 50 States appears to stem from certain Agreements on Coordination of Tax Administration (“ACTA”), which officials in those States have consummated with the Commissioner of Internal Revenue.  A template for ACTA agreements can be found at the IRS Internet website and in the Supreme Law Library on the Internet.

However, those ACTA agreements are demonstrably fraudulent, for example, by expressly defining “IRS” as a lawful bureau within the U.S. Department of the Treasury.  (See Answer to Question 1 above.)  Moreover, those ACTA agreements also appear to violate State laws requiring competitive bidding before such a service contract can be awarded by a State government to any subcontractor.  There is no evidence to indicate that ACTA agreements were reached after competitive bidding processes;  on the contrary, the IRS is adamant about maintaining a monopoly syndicate.

1. Can IRS legally show “Department of the Treasury” on their outgoing mail?

Answer:  No.  It is obvious that such deceptive nomenclature is intended to convey the false impression that IRS is a lawful bureau or department within the U.S. Department of the Treasury.  Federal laws prohibit the use of United States Mail for fraudulent purposes.  Every piece of U.S. Mail sent from IRS with “Department of the Treasury” in the return address, is one count of mail fraud.  See also 31 U.S.C. 333.

1. Does the U.S. Department of Justice have power of attorney to represent the IRS in federal court?

Answer:  No.  Although the U.S. Department of Justice (“DOJ”) does have power of attorney to represent federal agencies before federal courts, the IRS is not an “agency” as that term is legally defined in the Freedom of Information Act or in the Administrative Procedures Act.  The governments of all federal Territories are expressly excluded from the definition of federal “agency” by Act of Congress.  See 5 U.S.C. 551(1)(C).

Since IRS is domiciled in Puerto Rico (RICO?), it is thereby excluded from the definition of federal agencies which can be represented by the DOJ.  The IRS Chief Counsel, appointed by the President under authority of 31 U.S.C. 301(f)(2), can appear, or appoint a delegate to appear in federal court on behalf of IRS and IRS employees.  Again, see the Answer to Question 1 above.  As far as powers of attorney are concerned, the chain of command begins with Congress, flows to the President, and then to the IRS Chief Counsel, and NOT to the U.S. Department of Justice.

1. Were the so-called 14^th and 16^th amendments properly ratified?

Answer:  No.  Neither was properly ratified.  In the case of People v. Boxer (December 1992), docket number #S-030016, U.S. Senator Barbara Boxer fell totally silent in the face of an Application to the California Supreme Court by the People of California, for an ORDER compelling Senator Boxer to witness the material evidence against the so-called 16^th amendment.

That so‑called “amendment” allegedly authorized federal income taxation, even though it contains no provision expressly repealing two Constitutional Clauses mandating that direct taxes must be apportioned.  The Ninth Circuit Court of Appeals and the U.S. Supreme Court have both ruled that repeals by implication are not favored.  See Crawford Fitting Co. et al. v. J.T. Gibbons, Inc., 482 U.S. 437, 442 (1987).

The material evidence in question was summarized in AFFIDAVIT’s that were properly executed and filed in that case.  Boxer fell totally silent, thus rendering those affidavits the “truth of the case.”  The so‑called 16^th amendment has now been correctly identified as a major fraud upon the American People and the United States.  Major fraud against the United States is a serious federal offense.  See 18 U.S.C. 1031.

Similarly, the so-called 14^th amendment was never properly ratified either.  In the case of Dyett v. Turner, 439 P.2d  266, 270 (1968), the Utah Supreme Court recited numerous historical facts proving, beyond any shadow of a doubt, that the so‑called 14^th amendment was likewise a major fraud upon the American People.

Those facts, in many cases, were Acts of the several State Legislatures voting for or against that proposal to amend the U.S. Constitution.  The Supreme Law Library has a collection of references detailing this major fraud.

The U.S. Constitution requires that constitutional amendments be ratified by three-fourths of the several States.  As such, their Acts are governed by the Full Faith and Credit Clause in the U.S. Constitution.  See Article IV, Section 1.

Judging by the sheer amount of litigation its various sections have generated, particularly Section 1, the so‑called 14^th amendment is one of the worst pieces of legislation ever written in American history.  The phrase “subject to the jurisdiction of the United States” is properly understood to mean “subject to the municipal jurisdiction of Congress.”  (See Answer to Question 19 below.)

For this one reason alone, the Congressional Resolution proposing the so-called 14^th amendment is provably vague and therefore unconstitutional.  See 14 Stat. 358-359, Joint Resolution No. 48, June 16, 1866.

1. Where are the statutes that create a specific liability for federal income taxes?

Answer:  Section 1 of the Internal Revenue Code (“IRC”) contains no provisions creating a specific liability for taxes imposed by subtitle A.  Aside from the statutes which apply only to federal government employees, pursuant to the Public Salary Tax Act, the only other statutes that create a specific liability for federal income taxes are those itemized in the definition of “Withholding agent” at IRC section 7701(a)(16).  For example, see IRC section 1461.  A separate liability statute for “employment” taxes imposed by subtitle C is found at IRC section 3403.

After a worker authorizes a payroll officer to withhold taxes, typically by completing Form W‑4, the payroll officer then becomes a withholding agent who is legally and specifically liable for payment of all taxes withheld from that worker’s paycheck.  Until such time as those taxes are paid in full into the Treasury of the United States, the withholding agent is the only party who is legally liable for those taxes, not the worker.  See IRC section 7809 (“Treasury of the United States”).

If the worker opts instead to complete a Withholding Exemption Certificate, consistent with IRC section 3402(n), the payroll officer is not thereby authorized to withhold any federal income taxes.  In this latter situation, there is absolutely no liability for the worker or for the payroll officer;  in other words, there is no liability PERIOD, specifically because there is no withholding agent.

1. Can a federal regulation create a specific liability, when no specific liability is created by the corresponding statute?

Answer:  No.  The U.S. Constitution vests all legislative power in the Congress of the United States.  See Article I, Section 1.  The Executive Branch of the federal government has no legislative power whatsoever.  This means that agencies of the Executive Branch, and also the federal Courts in the Judicial Branch, are prohibited from making law.

If an Act of Congress fails to create a specific liability for any tax imposed by that Act, then there is no liability for that tax.  Executive agencies have no authority to cure any such omission by using regulations to create a liability.

“[A]n administrative agency may not create a criminal offense or any liability not sanctioned by the lawmaking authority, especially a liability for a tax or inspection fee.”  See Commissioner of Internal Revenue v. Acker, 361 U.S. 87, 4 L.Ed.2d 127, 80 S.Ct. 144 (1959), and Independent Petroleum Corp. v. Fly, 141 F.2d 189 (5^th Cir. 1944) as cited at 2 Am Jur 2d, p. 129, footnote 2 (1962 edition) [bold emphasis added].  However, this cite from American Jurisprudence has been removed from the 1994 edition of that legal encyclopedia.

1. The federal regulations create an income tax liability for what specific classes of people?

Answer:  The regulations at 26 CFR 1.1-1 attempted to create a specific liability for all “citizens of the United States” and all “residents of the United States”.  However, those regulations correspond to IRC section 1, which does not create a specific liability for taxes imposed by subtitle A.

Therefore, these regulations are an overly broad extension of the underlying statutory authority; as such, they are unconstitutional, null and void ab initio (from the beginning, in Latin).  The Acker case cited above held that federal regulations can not exceed the underlying statutory authority.  (See Answer to Question 8 above.)

1. How many classes of citizens are there, and how did this number come to be?

Answer:  There are two (2) classes of citizens:  State Citizens and federal citizens.  The first class originates in the Qualifications Clauses in the U.S. Constitution, where the term “Citizen of the United States” is used.  (See 1:2:2, 1:3:3 and 2:1:5.)  Notice the UPPER-CASE “C” in “Citizen”.

The pertinent court cases have defined the term “United States” in these Clauses to mean “States United”, and the full term means “Citizen of ONE OF the States United”.  See People v. De La Guerra, 40 Cal. 311, 337 (1870);  Judge Pablo De La Guerra signed the California Constitution of 1849, when California first joined the Union.  Similar terms are found in the Diversity Clause at Article III, Section 2, Clause 1, and in the Privileges and Immunities Clause at Article IV, Section 2, Clause 1.  Prior to the Civil War, there was only one (1) class of Citizens under American Law.  See the holding in Pannill v. Roanoke, 252 F. 910, 914‑915 (1918), for definitive authority on this key point.

The second class originates in the 1866 Civil Rights Act, where the term “citizen of the United States” is used.  This Act was later codified at 42 U.S.C. 1983.  Notice the lower-case “c” in “citizen”.  The pertinent court cases have held that Congress thereby created a municipal franchise primarily for members of the Negro race, who were freed by President Lincoln’s Emancipation Proclamation (a war measure), and later by the Thirteenth Amendment banning slavery and involuntary servitude.  Compelling payment of a “tax” for which there is no liability statute is tantamount to involuntary servitude, and extortion.

Instead of using the unique term “federal citizen”, as found in Black’s Law Dictionary, Sixth Edition, it is now clear that the Radical Republicans who sponsored the 1866 Civil Rights Act were attempting to confuse these two classes of citizens.  Then, they attempted to elevate this second class to constitutional status, by proposing a 14^th amendment to the U.S. Constitution.  As we now know, that proposal was never ratified.  (See Answer to Question 6 above.)

Numerous court cases have struggled to clarify the important differences between the two classes.  One of the most definitive, and dispositive cases, is Pannill v. Roanoke, 252 F. 910, 914‑915 (1918), which clearly held that federal citizens had no standing to sue under the Diversity Clause, because they were not even contemplated when Article III in the U.S. Constitution was first being drafted, circa 1787 A.D.

Another is Ex parte Knowles, 5 Cal. 300 (1855) in which the California Supreme Court ruled that there was no such thing as a “citizen of the United States” (as of the year 1855 A.D.).  Only federal citizens have standing to invoke 42 U.S.C. 1983;  whereas State Citizens do not.  See Wadleigh v. Newhall, 136 F. 941 (C.C. Cal. 1905).

Many more cases can be cited to confirm the existence of two classes of citizens under American Law.  These cases are thoroughly documented in the book entitled “The Federal Zone: Cracking the Code of Internal Revenue” by Paul Andrew Mitchell, B.A., M.S., now in its eleventh edition.  See also the pleadings in the case of USA v. Gilbertson, also in the Supreme Law Library.

1. Can one be a State Citizen, without also being a federal citizen?

Answer:  Yes.  The 1866 Civil Rights Act was municipal law, confined to the District of Columbia and other limited areas where Congress is the “state” government with exclusive legislative jurisdiction there.  These areas are now identified as “the federal zone.”  (Think of it as the blue field on the American flag;  the stars on the flag are the 50 States.)  As such, the 1866 Civil Rights Act had no effect whatsoever upon the lawful status of State Citizens, then or now.

Several courts have already recognized our Right to be State Citizens without also becoming federal citizens.  For excellent examples, see State v. Fowler, 41 La. Ann. 380, 6 S. 602 (1889) and Gardina v. Board of Registrars, 160 Ala. 155, 48 S. 788, 791 (1909).  The Maine Supreme Court also clarified the issue by explaining our “Right of Election” or “freedom of choice,” namely, our freedom to choose between two different forms of government.  See 44 Maine 518 (1859), Hathaway, J. dissenting.

Since the Guarantee Clause does not require the federal government to guarantee a Republican Form of Government to the federal zone, Congress is free to create a different form of government there, and so it has.  In his dissenting opinion in Downes v. Bidwell, 182 U.S. 244 at 380 (1901), Supreme Court Justice Harlan called it an absolute legislative democracy.

But, State Citizens are under no legal obligation to join or pledge any allegiance to that legislative democracy;  their allegiance is to one or more of the several States of the Union (i.e. the white stars on the American flag, not the blue field).

1. Who was Frank Brushaber, and why was his U.S. Supreme Court case so important?

Answer:  Frank Brushaber was the Plaintiff in the case of Brushaber v. Union Pacific Railroad Company, 240 U.S. 1 (1916), the first U.S. Supreme Court case to consider the so‑called 16^th amendment.  Brushaber identified himself as a Citizen of New York State and a resident of the Borough of Brooklyn, in the city of New York, and nobody challenged that claim.

The Union Pacific Railroad Company was a federal corporation created by Act of Congress to build a railroad through Utah (from the Union to the Pacific), at a time when Utah was a federal Territory, i.e. inside the federal zone.

Brushaber’s attorney committed an error by arguing that the company had been chartered by the State of Utah, but Utah was not a State of the Union when Congress first created that corporation.

Brushaber had purchased stock issued by the company.  He then sued the company to recover taxes that Congress had imposed upon the dividends paid to its stockholders.  The U.S. Supreme Court ruled against Frank Brushaber, and upheld the tax as a lawful excise, or indirect tax.

The most interesting result of the Court’s ruling was a Treasury Decision (“T.D.”) that the U.S. Department of the Treasury later issued as a direct consequence of the high Court’s opinion.  In T.D. 2313, the U.S. Treasury Department expressly cited the Brushaber decision, and it identified Frank Brushaber as a “nonresident alien” and the Union Pacific Railroad Company as a “domestic corporation”.  This Treasury Decision has never been modified or repealed.

T.D. 2313 is crucial evidence proving that the income tax provisions of the IRC are municipal law, with no territorial jurisdiction inside the 50 States of the Union.  The U.S. Secretary of the Treasury who approved T.D. 2313 had no authority to extend the holding in the Brushaber case to anyone or anything not a proper Party to that court action.

Thus, there is no escaping the conclusion that Frank Brushaber was the nonresident alien to which that Treasury Decision refers.  Accordingly, all State Citizens are nonresident aliens with respect to the municipal jurisdiction of Congress, i.e. the federal zone.

1. What is a “Withholding agent”?

Answer:  (See Answer to Question 7 first.)  The term “Withholding agent” is legally defined at IRC section 7701(a)(16).  It is further defined by the statutes itemized in that section, e.g. IRC 1461 where liability for funds withheld is clearly assigned.  In plain English, a “withholding agent” is a person who is responsible for withholding taxes from a worker’s paycheck, and then paying those taxes into the Treasury of the United States, typically on a quarterly basis.  See IRC section 7809.

One cannot become a withholding agent unless workers first authorize taxes to be withheld from their paychecks.  This authorization is typically done when workers opt to execute a valid W‑4 “Employee’s Withholding Allowance Certificate.”  In plain English, by signing a W‑4 workers designate themselves as “employees” and certify they are allowing withholding to occur.

If workers do not execute a valid W‑4 form, a company’s payroll officer is not authorized to withhold any federal income taxes from their paychecks.  In other words, the payroll officer does not have “permission” or “power of attorney” to withhold taxes, until and unless workers authorize or “allow” that withholding ‑‑ by signing Form W‑4 knowingly, intentionally and voluntarily.

Pay particular attention to the term “Employee” in the title of this form.  A properly executed Form W‑4 creates the presumption that the workers wish to be treated as if they were “employees” of the federal government.  Obviously, for people who do not work for the federal government, such a presumption is a legal fiction, at best.

1. What is a “Withholding Exemption Certificate”?

Answer:  A “Withholding Exemption Certificate” is an alternative to Form W‑4, authorized by IRC section 3402(n) and executed in lieu of Form W‑4.  Although section 3402(n) does authorize this Certificate, the IRS has never added a corresponding form to its forms catalog (see the IRS “Printed Products Catalog”).

In the absence of an official IRS form, workers can use the language of section 3402(n) to create their own Certificates.  In simple language, the worker certifies that s/he had no federal income tax liability last year, and anticipates no federal income tax liability during the current calendar year.  Because there are no liability statutes for workers in the private sector, this certification is easy to justify.

Many public and private institutions have created their own form for the Withholding Exemption Certificate, e.g. California Franchise Tax Board, and Johns Hopkins University in Baltimore, Maryland.  This fact can be confirmed by using any search engine, e.g. google.com, to locate occurrences of the term “withholding exemption certificate” on the Internet.  This term occurs several times in IRC section 3402.

1. What is “tax evasion” and who might be guilty of this crime?

Answer:  “Tax evasion” is the crime of evading a lawful tax.  In the context of federal income taxes, this crime can only be committed by persons who have a legal liability to pay, i.e. the withholding agent.  If one is not employed by the federal government, one is not subject to the Public Salary Tax Act unless one chooses to be treated “as if” one is a federal government “employee.”  This is typically done by executing a valid Form W‑4.

However, as discussed above, Form W‑4 is not mandatory for workers who are not “employed” by the federal government.  Corporations chartered by the 50 States of the Union are technically “foreign” corporations with respect to the IRC;  they are decidedly not the federal government, and should not be regarded “as if” they are the federal government, particularly when they were never created by any Act of Congress.

Moreover, the Indiana Supreme Court has ruled that Congress can only create a corporation in its capacity as the Legislature for the federal zone.  Such corporations are the only “domestic” corporations under the pertinent federal laws.  This writer’s essay entitled “A Cogent Summary of Federal Jurisdictions” clarifies this important distinction between “foreign” and “domestic” corporations in simple, straightforward language.

If Congress were authorized to create national corporations, such a questionable authority would invade States’ rights reserved to them by the Tenth Amendment, namely, the right to charter their own domestic corporations.  The repeal of Prohibition left the Tenth Amendment unqualified.  See the Constantine case supra.

For purposes of the IRC, the term “employer” refers only to federal government agencies, and an “employee” is a person who works for such an “employer”.

1. Why does IRS Form 1040 not require a Notary Public to notarize a taxpayer’s signature?

Answer:  This question is one of the fastest ways to unravel the fraudulent nature of federal income taxes.  At 28 U.S.C. section 1746, Congress authorized written verifications to be executed under penalty of perjury without the need for a Notary Public, i.e. to witness one’s signature.

This statute identifies two different formats for such written verifications:  (1) those executed outside the “United States” and (2) those executed inside the “United States”.  These two formats correspond to sections 1746(1) and 1746(2), respectively.

What is extremely revealing in this statute is the format for verifications executed “outside the United States”.  In this latter format, the statute adds the qualifying phrase “under the laws of the United States of America”.

Clearly, the terms “United States” and “United States of America” are both used in this same statute.  They are not one and the same.  The former refers to the federal government — in the U.S. Constitution and throughout most federal statutes.  The latter refers to the 50 States that are united by, and under, the U.S. Constitution.  28 U.S.C. 1746 is the only federal statute in all of Title 28 of the United States Code that utilizes the term “United States of America”, as such.

It is painfully if not immediately obvious, then, that verifications made under penalty of perjury are outside the “United States” (read “the federal zone”) if and when they are executed inside the 50 States of the Union (read “the State zone”).

Likewise, verifications made under penalty of perjury are outside the 50 States of the Union, if and when they are executed inside the “United States”.

The format for signatures on Form 1040 is the one for verifications made inside the United States (federal zone) and outside the United States of America (State zone).

1. Does the term “United States” have multiple legal meanings and, if so, what are they?

Answer:  Yes.  The term has several meanings.  The term “United States” may be used in any one of several senses.  [1] It may be merely the name of a sovereign occupying the position analogous to that of other sovereigns in the family of nations.  [2] It may designate the territory over which the sovereignty of the United States extends, or [3] it may be the collective name of the States which are united by and under the Constitution.  See Hooven & Allison Co. v. Evatt, 324 U.S. 652 (1945) [bold emphasis, brackets and numbers added for clarity].

This is the very same definition that is found in Black’s Law Dictionary, Sixth Edition.  The second of these three meanings refers to the federal zone and to Congress only when it is legislating in its municipal capacity.  For example, Congress is legislating in its municipal capacity whenever it creates a federal corporation, like the United States Postal Service.

It is terribly revealing of the manifold frauds discussed in these Answers, that the definition of “United States” has now been removed from the Seventh Edition of Black’s Law Dictionary.

1. Is the term “income” defined in the IRC and, if not, where is it defined?

Answer:  The Eighth Circuit Court of Appeals has already ruled that the term “income” is not defined anywhere in the IRC:  “The general term ‘income’ is not defined in the Internal Revenue Code.”  U.S. v. Ballard, 535 F.2d 400, 404 (8th Circuit, 1976).

Moreover, in Mark Eisner v. Myrtle H. Macomber, 252 U.S. 189 (1920), the high Court told Congress it could not legislate any definition of “income” because that term was believed to be in the U.S. Constitution.  The Eisner case was predicated on the ratification of the 16^th amendment, which would have introduced the term “income” into the U.S. Constitution for the very first time (but only if that amendment had been properly ratified).

In Merchant’s Loan & Trust Co. v. Smietanka, 255 U.S. 509 (1921), the high Court defined “income” to mean the profit or gain derived from corporate activities.  In that instance, the tax is a lawful excise tax imposed upon the corporate privilege of limited liability, i.e. the liabilities of a corporation do not reach its officers, employees, directors or stockholders.

1. What is municipal law, and are the IRC’s income tax provisions municipal law, or not?

Answer:  Yes.  The IRC’s income tax provisions are municipal law.  Municipal law is law that is enacted to govern the internal affairs of a sovereign State;  in legal circles, it is also known as Private International Law.  Under American Law, it has a much wider meaning than the ordinances enacted by the governing body of a municipality, i.e. city council or county board of supervisors.  In fact, American legal encyclopedias define “municipal” to mean “internal”, and for this reason alone, the Internal Revenue Code is really a Municipal Revenue Code.

A mountain of additional evidence has now been assembled and published in the book “The Federal Zone” to prove that the IRC’s income tax provisions are municipal law.

One of the most famous pieces of evidence is a letter from a Connecticut Congresswoman, summarizing the advice of legal experts employed by the Congressional Research Service and the Legislative Counsel.  Their advice confirmed that the meaning of “State” at IRC section 3121(e) is restricted to the named territories and possessions of D.C., Guam, Virgin Islands, American Samoa, and Puerto Rico.

In other words, the term “State” in that statute, and in all similar federal statutes, includes ONLY the places expressly named, and no more.

1. What does it mean if my State is not mentioned in any of the federal income tax statutes?

The general rule is that federal government powers must be expressed and enumerated.  For example, the U.S. Constitution is a grant of enumerated powers.  If a power is not enumerated in the U.S. Constitution, then Congress does not have any authority to exercise that power.  This rule is tersely expressed in the Ninth Amendment, in the Bill of Rights.

If California is not mentioned in any of the federal income tax statutes, then those statutes have no force or effect within that State.  This is also true of all 50 States.

Strictly speaking, the omission or exclusion of anyone or any thing from a federal statute can be used to infer that the omission or exclusion was intentional by Congress.  In Latin, this is tersely stated as follows:  Inclusio unius est exclusio alterius.  In English, this phrase is literally translated:  Inclusion of one thing is the exclusion of all other things [that are not mentioned].  This phrase can be found in any edition of Black’s Law Dictionary;  it is a maxim of statutory construction.

The many different definitions of the term “State” that are found in federal laws are intentionally written to appear as if they include the 50 States PLUS the other places mentioned.  As the legal experts in Congress have now confirmed, this is NOT the correct way to interpret, or to construct, these statutes.

If a place is not mentioned, every American may correctly infer that the omission of that place from a federal statute was an intentional act of Congress.  Whenever it wants to do so, Congress knows how to define the term “United States” to mean the 50 States of the Union.  See IRC section 4612(a)(4)(A).

1. In what other ways is the IRC deliberately vague, and what are the real implications for the average American?

There are numerous other ways in which the IRC is deliberately vague.  The absence of any legal definition for the term “income” is a classic deception.  The IRS enforces the Code as a tax on everything that “comes in,” but nothing could be further from the truth.  “Income” is decidedly NOT everything that “comes in.”

More importantly, the fact that this vagueness is deliberate is sufficient grounds for concluding that the entire Code is null, void and unconstitutional, for violating our fundamental Right to know the nature and cause of any accusation, as guaranteed by the Sixth Amendment in the Bill of Rights.

Whether the vagueness is deliberate or not, any statute is unconstitutionally void if it is vague.  If a statute is void for vagueness, the situation is the same as if it had never been enacted at all, and for this reason it can be ignored entirely.

1. Has Title 26 of the United States Code (“U.S.C.”) ever been enacted into positive law, and what are the legal implications if Title 26 has not been enacted into positive law?

Answer:  No.  Another, less obvious case of deliberate deception is the statute at IRC section 7851(a)(6)(A), where it states that the provisions of subtitle F shall take effect on the day after the date of enactment of “this title”.  Because the term “this title” is not defined anywhere in the IRC, least of all in the section dedicated to definitions, one is forced to look elsewhere for its meaning, or to derive its meaning from context.

Throughout Title 28 of the United States Code — the laws which govern all the federal courts — the term “this title” clearly refers to Title 28.  This fact would tend to support a conclusion that “this title”, as that term is used in the IRC, refers to Title 26 of the United States Code.  However, Title 26 has never been enacted into positive law, as such.

Even though all federal judges may know the secret meaning of “this title”, they are men and women of UNcommon intelligence.  The U.S. Supreme Court’s test for vagueness is violated whenever men and women of common intelligence must necessarily guess at the meaning and differ as to the application of a vague statute.  See Connally et al. v. General Construction Co., 269 U.S. 385, 391 (1926).  Thus, federal judges are applying the wrong test for vagueness.

Accordingly, the provisions of subtitle F have never taken effect.  (“F” is for enForcement!)  This subtitle contains all of the enforcement statutes of the IRC, e.g. filing requirements, penalties for failure to file and tax evasion, grants of court jurisdiction over liens, levies and seizures, summons enforcement and so on.

In other words, the IRC is a big pile of Code without any teeth;  as such, it can impose no legal obligations upon anyone, not even people with dentures!

1. What federal courts are authorized to prosecute income tax crimes?

This question must be addressed in view of the Answer to Question 22 above.  Although it may appear that certain statutes in the IRC grant original jurisdiction to federal district courts, to institute prosecutions of income tax crimes, none of the statutes found in subtitle F has ever taken effect.  For this reason, those statutes do not authorize the federal courts to do anything at all.  As always, appearances can be very deceiving.  Remember the Wizard of Oz or the mad tea party of Alice in Wonderland?

On the other hand, the federal criminal Code at Title 18, U.S.C., does grant general authority to the District Courts of the United States (“DCUS”) to prosecute violations of the statutes found in that Code.  See 18 U.S.C. 3231.

It is very important to appreciate the fact that these courts are not the same as the United States District Courts (“USDC”).  The DCUS are constitutional courts that originate in Article III of the U.S. Constitution.  The USDC are territorial tribunals, or legislative courts, that originate in Article IV, Section 3, Clause 2 of the U.S. Constitution, also known as the Territory Clause.

This author’s OPENING BRIEF to the Eighth Circuit on behalf of the Defendant in USA v. Gilbertson cites numerous court cases that have already clarified the all important distinction between these two classes of federal district courts.  For example, in Balzac v. Porto Rico, 258 U.S. 298 at 312 (1922), the high Court held that the USDC belongs in the federal Territories.  This author’s OPENING BRIEF to the Ninth Circuit in Mitchell v. AOL Time Warner, Inc. et al. develops this theme in even greater detail;  begin reading at section “7(e)”.

The USDC, as such, appear to lack any lawful authorities to prosecute income tax crimes.  The USDC are legislative tribunals where summary proceedings dominate.

For example, under the federal statute at 28 U.S.C. 1292, the U.S. Courts of Appeal have no appellate jurisdiction to review interlocutory orders issued by the USDC.  Further details on this point are available in the Press Release entitled “Private Attorney General Cracks Title 28 of the United States Code” and dated November 26, 2001 A.D.

1. Are federal judges required to pay income taxes on their pay, and what are the real implications if they do pay taxes on their pay?

Answer:  No.  Federal judges who are appointed to preside on the District Courts of the United States –- the Article III constitutional courts –- are immune from any taxation of their pay, by constitutional mandate.

The fact that all federal judges are currently paying taxes on their pay is proof of undue influence by the IRS, posing as a duly authorized agency of the Executive Branch.  See Evans v. Gore, 253 U.S. 245 (1920).

Even if the IRS were a lawful bureau or department within the U.S. Department of the Treasury (which they are NOT), the existence of undue influence by the Executive Branch would violate the fundamental principle of Separation of Powers.  This principle, in theory, keeps the 3 branches of the federal government confined to their respective areas, and prevents any one branch from usurping the lawful powers that rightly belong to the other two branches.

The Separation of Powers principle is succinctly defined in Williams v. United States, 289 U.S. 553 (1933);  however, in that decision the Supreme Court erred by defining “Party” to mean only Plaintiffs in Article III, contrary to the definition of “Party” that is found in Bouvier’s Law Dictionary (1856).

The federal judiciary, contemplated by the organic U.S. Constitution, was intended to be independent and unbiased.  These two qualities are the essence, or sine qua non of judicial power, i.e. without which there is nothing.  Undue influence obviously violates these two qualities.  See Evans v. Gore supra.

In Lord v. Kelley, 240 F.Supp. 167, 169 (1965), the federal judge in that case was honest enough to admit, in his published opinion, that federal judges routinely rule in favor of the IRS, because they fear the retaliation that might result from ruling against the IRS.  There you have it, from the horse’s mouth!

In front of a class of law students at the University of Arizona in January of 1997, Chief Justice William H. Rehnquist openly admitted that all federal judges are currently paying taxes on their judicial pay.  This writer was an eyewitness to that statement by the Chief Justice of the U.S. Supreme Court -– the highest Court in the land.

Thus, all federal judges are now material witnesses to the practice of concealing the Withholding Exemption Certificate from them, when they were first hired as “employees” of the federal judiciary.  As material witnesses, they are thereby disqualified from presiding on all federal income tax cases.

1. Can federal grand juries issue valid indictments against illegal tax protesters?

Answer:  No.  Federal grand juries cannot issue valid indictments against illegal tax protesters.  Protest has never been illegal in America, because the First Amendment guarantees our fundamental Right to express our objections to any government actions, in written and in spoken words.

Strictly speaking, the term “illegal” cannot modify the noun “protesters” because to do so would constitute a violation of the First Amendment in the Bill of Rights, one of the most magnificent constitutional provisions ever written.

Accordingly, for the term “illegal tax protester” to survive this obvious constitutional challenge, the term “illegal” must modify the noun “tax”.  An illegal tax protester is, therefore, someone who is protesting an illegal tax.  Such an act of protest is protected by the First Amendment, and cannot be a crime.

Protest is also recognized and honored by the Uniform Commercial Code;  the phrases “under protest” and “without prejudice” are sufficient to reserve all of one’s fundamental Rights at law.  See U.C.C. 1-207 (UCCA 1207 in California).

By the way, the federal U.C.C. is also municipal law.  See the Answer to Question 19 above, and 77 Stat. 630, P.L. 88‑243, December 30, 1963 (one month after President John F. Kennedy was murdered).

1. Do IRS agents ever tamper with federal grand juries, and how is this routinely done?

Answer:  Yes.  IRS agents routinely tamper with federal grand juries, most often by misrepresenting themselves, under oath, as lawful employees and “Special Agents” of the federal government, and by misrepresenting the provisions of subtitle F as having any legal force or effect.  Such false representations of fact violate Section 43(a) of the Lanham Act, uncodified at 15 U.S.C. 1125(a).  (Title 15 of the United States Code has not been enacted into positive law either.)

They tamper with grand juries by acting as if “income” is everything that “comes in”, when there is no such definition anywhere in the IRC.  Such false descriptions of fact also violate Section 43(a) of the Lanham Act.

They tamper with grand juries by presenting documentary evidence which they had no authority to acquire, in the first instance, such as bank records.  Bank signature cards do not constitute competent waivers of their customers’ fundamental Rights to privacy, as secured by the Fourth Amendment.  The high standard for waivers of fundamental Rights was established by the U.S. Supreme Court in Brady v. U.S., 397 U.S. 742, 748 (1970).

IRS agents tamper with grand juries by creating and maintaining the false and fraudulent pretenses that the IRC is not vague, or that the income tax provisions have any legal force or effect inside the 50 States of the Union, when those provisions do not.

These are all forms of perjury, as well, and possibly also misprision of perjury by omission, i.e. serious federal offenses.

Finally, there is ample evidence that IRS agents bribe U.S. Attorneys, federal judges, and even the Office of the President with huge kickbacks, every time a criminal indictment is issued by a federal grand jury against an illegal tax protester.  (See the Answer to Question 25 above.)  These kick‑backs range from $25,000 to $35,000 in CASH!  They also violate the Anti-Kickback Act of 1986, which penalizes the payment of kickbacks from federal government subcontractors.  See 41 U.S.C. 51 et seq.

As a trust domiciled in Puerto Rico, the IRS is, without a doubt, a federal government subcontractor that is subject to this Act.  See 31 U.S.C. 1321(a)(62).  The systematic and premeditated pattern of racketeering by IRS employees also establishes probable cause to dismantle the IRS permanently for violating the Sherman Antitrust Act, first enacted in the year 1890 A.D. See 26 Stat. 209 (1890) (uncodified at 15 U.S.C. 1 et seq.)

1. What is “The Kickback Racket,” and where can I find evidence of its existence?

The evidence of this “kickback racket” was first discovered in a table of delegation orders, on a page within the Internal Revenue Manual (“IRM”) — the internal policy and procedure manual for all IRS employees.

Subsequently, this writer submitted a lawful request, under the Freedom of Information Act, for a certified list of all payments that had ever been made under color of these delegation orders in the IRM.  Mr. Mark L. Zolton, a tax law specialist within the Internal Revenue Service, responded on IRS letterhead, transmitted via U.S. Mail, that few records existed for these “awards” because most of them were paid in cash!

When this evidence was properly presented to a federal judge, who had been asked to enforce a federal grand jury subpoena against a small business in Arizona, he ended up obstructing all 28 pieces of U.S. Mail we had transmitted to that grand jury.

Obstruction of correspondence is a serious federal offense, and federal judges have no authority whatsoever to intercept U.S. Mail.  See 18 U.S.C. 1702.

Obviously, the federal judge — John M. Roll — did NOT want the grand jury in that case to know anything about these kickbacks.  They found out anyway, because of the manner in which this writer defended that small business, as its Vice President for Legal Affairs.

1. Can the IRS levy bank accounts without a valid court order?

Answer:  No.  The Fifth Amendment prohibits all deprivations of life, liberty, or property without due process of law.  Due Process of Law is another honored and well developed feature of American constitutional practice.  Put simply, it requires Notice and Hearing before any property can be seized by any federal government employees, agents, departments or agencies.

A levy against a bank account is a forced seizure of property, i.e. the funds on deposit in that account.  No such seizure can occur unless due process of law has first run its course.  This means notice, hearing, and deliberate adjudication of all the pertinent issues of law and fact.

Only after this process has run its proper or “due” course, can a valid court order be issued.  The holding in U.S. v. O’Dell, 160 F.2d 304 (6th Cir. 1947), makes it very clear that the IRS can only levy a bank account after first obtaining a Warrant of Distraint, or court ORDER.  And, of course, no court ORDER could ever be obtained unless all affected Parties had first enjoyed their “day in court.”

1. Do federal income tax revenues pay for any government services and, if so, which government services are funded by federal income taxes?

Answer:  No.  The money trail is very difficult to follow, in this instance, because the IRS is technically a trust with a domicile in Puerto Rico.  See 31 U.S.C. 1321(a)(62).  As such, their records are protected by laws which guarantee the privacy of trust records within that territorial jurisdiction, provided that the trust is not also violating the Sherman Antitrust Act.

They are technically not an “agency” of the federal government, as that term is defined in the Freedom of Information Act and in the Administrative Procedures Act.  The governments of the federal territories are expressly excluded from the definition of “agency” in those Acts of Congress.  See 5 U.S.C. 551(1)(C).  (See also the Answer to Question 5 above.)

All evidence indicates that they are a money laundry, extortion racket, and conspiracy to engage in a pattern of racketeering activity, in violation of 18 U.S.C. 1951 and 1961 et seq.

They appear to be laundering huge sums of money into foreign banks, mostly in Europe, and quite possibly into the Vatican.  See the national policy on money laundering at 31 U.S.C. 5341.

The final report of the Grace Commission, convened under President Ronald Reagan, quietly admitted that none of the funds they collect from federal income taxes goes to pay for any federal government services.  The Grace Commission found that those funds were being used to pay for interest on the federal debt, and income transfer payments to beneficiaries of entitlement programs like federal pension plans.

1. How can the Freedom of Information Act (“FOIA”) help me to answer other key tax questions?

The availability of correct information about federal government operations is fundamental to maintaining the freedom of the American People.  The Freedom of Information Act (“FOIA”), at 5 U.S.C. 552 et seq., was intended to make government documents available with a minimal amount of effort by the People.

As long as a document is not protected by one of the reasonable exemptions itemized in the FOIA, a requester need only submit a brief letter to the agency having custody of the requested document(s).  If the requested document is not produced within 20 working days (excluding weekends and federal holidays), the requester need only prepare a single appeal letter.

If the requested document is not produced within another 20 working days after the date of the appeal letter, the requester is automatically allowed to petition a District Court of the United States (Article III DCUS, not the Article IV USDC) — to compel production of the requested document, and judicially to enjoin the improper withholding of same.  See 5 U.S.C. 552(a)(4)(B).  The general rule is that statutes conferring original jurisdiction on federal district courts must be strictly construed.

This writer has pioneered the application of the FOIA to request certified copies of statutes and regulations which should exist, but do not exist.  A typical request anyone can make, to which the U.S. Treasury has now fallen totally silent, is for a certified copy of all statutes which create a specific liability for taxes imposed by subtitle A of the IRC.  For example, see the FOIA request that this writer prepared for author Lynne Meredith.

Of course, by now we already know the answer to this question, before asking it.  (Good lawyers always know the answers to their questions, before asking them.)

It should also be clear that such a FOIA request should not be directed to the IRS, because they are not an “agency” as that term is defined at 5 U.S.C. 551(1)(C).  Address it instead to the Disclosure Officer, Disclosure Services, Room 1054-MT, U.S. Department of the Treasury, Washington 20220, DISTRICT OF COLUMBIA, USA.  This is the format for “foreign” addresses, as explained in USPS Publication #221.

As James Madison once wrote, “A popular government without popular information or the means of acquiring it, is but a Prologue to a Farce or a Tragedy or perhaps both.  Knowledge will forever govern ignorance, and a people who mean to be their own Governors, must arm themselves with the power knowledge gives.”

1. Where can I find more information, and still protect my privacy?

There are many civic organizations throughout America who have dedicated their precious time and energy to acquire and disseminate widely these documented truths about the Internal Revenue Service and the Internal Revenue Code.

The Internet’s World Wide Web (“www”) is perhaps the best single source of information (and disinformation) about the IRS, and the major problems now confirmed in the IRC and in the mountains of related policies, procedures, practices, customs, rules, regulations, forms and schedules.

Learn to become a sophisticated consumer of information, and the knowledge you seek will be yours to keep and share — with those you love and endeavor to free from this terrible plague that persists in America.

Good luck, and may God bless your earnest endeavors to ensure the blessings of Liberty for ourselves and our Posterity, as stated in the Preamble to the U.S. Constitution and in the Declaration of Independence.

To order additional certified and embossed copies of this document, please send $30.00 in cash or blank U.S. Postal Money Order to:

Forwarding Agent

9518 East 4^th Avenue #90

Spokane Valley 99206

WASHINGTON, USA

A “blank” U.S. Postal Money Order leaves the “PAY TO” line blank, permitting us to negotiate it freely.  You may, of course, complete the other half;  this allows you to obtain a photocopy of the cancelled money order from the U.S. Postal Service without the need for a court order.

Also, be sure to request information about our MOTIONS FOR PRELIMINARY INJUNCTION to freeze all IRS assets and to enjoin IRS from depositing any tax collections into any account(s) other than the Treasury of the United States.  These MOTIONS were filed in two appeals at the Ninth Circuit in San Francisco, using FRAP Rule 8 and the special procedures available to a Private Attorney General under the RICO laws.

Finally, don’t miss this opportunity to request more information about our historic APPLICATION FOR ORDER DISSOLVING THE INTERNAL REVENUE SERVICE, under a specific authority granted to the District Courts of the United States (“DCUS”) at 18 U.S.C. 1964(a).  Refer to DCUS docket #SA CV 02-0382 GLT(ANx), Santa Ana, California.

VERIFICATION

As the Undersigned, I hereby verify, under penalty of perjury, under the laws of the United States of America, without the “United States” (federal government), that the above statement of facts and laws is true and correct, according to the best of My current information, knowledge, and belief, so help Me God, pursuant to 28 U.S.C. 1746(1).  See the Supremacy Clause for Constitutional authority.

Dated:    ______________________________________________________

Signed:   ______________________________________________________

Printed:  Paul Andrew Mitchell, B.A., M.S

Citizen of California, qualified Federal Witness,

Private Attorney General, Author of “The Federal Zone:

Cracking the Code of Internal Revenue” (all editions),

and Webmaster of the Supreme Law Library:

http://www.supremelaw.org/index.htm

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Some people may not like my headline. I don’t care. Make up your own headline, if you like. Call it whatever you want.

Barney Frank doesn’t want to rock the boat. Oh no. Appearances need to be maintained on the Ship of Fools.

Well, the only thing that’s certain is that the Ship of Fools is headed for oblivion. What’s not clear is how much time remains on the journey.

Via: Bloomberg:

Federal Reserve General Counsel Scott Alvarez said audits of monetary policy by the U.S. Congress could lead to higher interest rates and reduced confidence in central bank policy.

Congressional audits of monetary policy could “cause the markets and the public to lose confidence in the independence of the judgments of the Federal Reserve,” Alvarez told the House Financial Services Committee today in response to a question from Representative Dennis Moore, a Kansas Democrat. Alvarez said in his prepared remarks the audits would probably “chill” the central bank’s discussions on interest rates.

Fed Chairman Ben S. Bernanke and his colleagues are trying to persuade lawmakers not to pass legislation sponsored by Representative Ron Paul of Texas that would repeal the central bank’s immunity to audits of monetary policy. Fed officials used emergency powers to protect creditors of Bear Stearns Cos. and American International Group Inc. during the financial crisis, prompting congressional scrutiny.

“We don’t want to give the rest of the world or, more important, domestic investors the impression that we are somehow in a formal way injecting Congress into the setting of monetary policy,” said Representative Barney Frank, a Massachusetts Democrat and chairman of the committee. “That could have a very destabilizing effect.”

Frank added that “a lot needs to be done” on Fed transparency and said that Congress can accomplish that without interfering with the independence of monetary policy decisions.

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The Federal Reserve, through its extensive network of consultants, visiting scholars, alumni and staff economists, so thoroughly dominates the field of economics that real criticism of the central bank has become a career liability for members of the profession, an investigation by the Huffington Post has found.

This dominance helps explain how, even after the Fed failed to foresee the greatest economic collapse since the Great Depression, the central bank has largely escaped criticism from academic economists. In the Fed’s thrall, the economists missed it, too.

“The Fed has a lock on the economics world,” says Joshua Rosner, a Wall Street analyst who correctly called the meltdown. “There is no room for other views, which I guess is why economists got it so wrong.”

One critical way the Fed exerts control on academic economists is through its relationships with the field’s gatekeepers. For instance, at the Journal of Monetary Economics, a must-publish venue for rising economists, more than half of the editorial board members are currently on the Fed payroll — and the rest have been in the past.

The Fed failed to see the housing bubble as it happened, insisting that the rise in housing prices was normal. In 2004, after “flipping” had become a term cops and janitors were using to describe the way to get rich in real estate, then-Federal Reserve Chairman Alan Greenspan said that “a national severe price distortion [is] most unlikely.” A year later, current Chairman Ben Bernanke said that the boom “largely reflect strong economic fundamentals.”

The Fed also failed to sufficiently regulate major financial institutions, with Greenspan — and the dominant economists — believing that the banks would regulate themselves in their own self-interest.

Despite all this, Bernanke has been nominated for a second term by President Obama.

In the field of economics, the chairman remains a much-heralded figure, lauded for reaction to a crisis generated, in the first place, by the Fed itself. Congress is even considering legislation to greatly expand the powers of the Fed to systemically regulate the financial industry.

Paul Krugman, in Sunday’s New York Times magazine, did his own autopsy of economics, asking “How Did Economists Get It So Wrong?” Krugman concludes that “[e]conomics, as a field, got in trouble because economists were seduced by the vision of a perfect, frictionless market system.”

So who seduced them?

The Fed did it.

Three Decades of Domination

The Fed has been dominating the profession for about three decades. “For the economics profession that came out of the [second world] war, the Federal Reserve was not a very important place as far as they were concerned, and their views on monetary policy were not framed by a working relationship with the Federal Reserve. So I would date it to maybe the mid-1970s,” says University of Texas economics professor — and Fed critic — James Galbraith. “The generation that I grew up under, which included both Milton Friedman on the right and Jim Tobin on the left, were independent of the Fed. They sent students to the Fed and they influenced the Fed, but there wasn’t a culture of consulting, and it wasn’t the same vast network of professional economists working there.”

But by 1993, when former Fed Chairman Greenspan provided the House banking committee with a breakdown of the number of economists on contract or employed by the Fed, he reported that 189 worked for the board itself and another 171 for the various regional banks. Adding in statisticians, support staff and “officers” — who are generally also economists — the total number came to 730. And then there were the contracts. Over a three-year period ending in October 1994, the Fed awarded 305 contracts to 209 professors worth a total of $3 million.

Just how dominant is the Fed today?

The Federal Reserve’s Board of Governors employs 220 PhD economists and a host of researchers and support staff, according to a Fed spokeswoman. The 12 regional banks employ scores more. (HuffPost placed calls to them but was unable to get exact numbers.) The Fed also doles out millions of dollars in contracts to economists for consulting assignments, papers, presentations, workshops, and that plum gig known as a “visiting scholarship.” A Fed spokeswoman says that exact figures for the number of economists contracted with weren’t available. But, she says, the Federal Reserve spent $389.2 million in 2008 on “monetary and economic policy,” money spent on analysis, research, data gathering, and studies on market structure; $433 million is budgeted for 2009.

That’s a lot of money for a relatively small number of economists. According to the American Economic Association, a total of only 487 economists list “monetary policy, central banking, and the supply of money and credit,” as either their primary or secondary specialty; 310 list “money and interest rates”; and 244 list “macroeconomic policy formation [and] aspects of public finance and general policy.” The National Association of Business Economists tells HuffPost that 611 of its roughly 2,400 members are part of their “Financial Roundtable,” the closest way they can approximate a focus on monetary policy and central banking.

Robert Auerbach, a former investigator with the House banking committee, spent years looking into the workings of the Fed and published much of what he found in the 2008 book, “Deception
and Abuse at the Fed”. A chapter in that book, excerpted here, provided the impetus for this investigation.

Auerbach found that in 1992, roughly 968 members of the AEA designated “domestic monetary and financial theory and institutions” as their primary field, and 717 designated it as their secondary field. Combining his numbers with the current ones from the AEA and NABE, it’s fair to conclude that there are something like 1,000 to 1,500 monetary economists working across the country. Add up the 220 economist jobs at the Board of Governors along with regional bank hires and contracted economists, and the Fed employs or contracts with easily 500 economists at any given time. Add in those who have previously worked for the Fed — or who hope to one day soon — and you’ve accounted for a very significant majority of the field.

Auerbach concludes that the “problems associated with the Fed’s employing or contracting with large numbers of economists” arise “when these economists testify as witnesses at legislative hearings or as experts at judicial proceedings, and when they publish their research and views on Fed policies, including in Fed publications.”

Gatekeepers On The Payroll

The Fed keeps many of the influential editors of prominent academic journals on its payroll. It is common for a journal editor to review submissions dealing with Fed policy while also taking the bank’s money. A HuffPost review of seven top journals found that 84 of the 190 editorial board members were affiliated with the Federal Reserve in one way or another.

“Try to publish an article critical of the Fed with an editor who works for the Fed,” says Galbraith. And the journals, in turn, determine which economists get tenure and what ideas are considered respectable.

The pharmaceutical industry has similarly worked to control key medical journals, but that involves several companies. In the field of economics, it’s just the Fed.

Being on the Fed payroll isn’t just about the money, either. A relationship with the Fed carries prestige; invitations to Fed conferences and offers of visiting scholarships with the bank signal a rising star or an economist who has arrived.

Affiliations with the Fed have become the oxygen of academic life for monetary economists. “It’s very important, if you are tenure track and don’t have tenure, to show that you are valued by the Federal Reserve,” says Jane D’Arista, a Fed critic and an economist with the Political Economy Research Institute at the University of Massachusetts, Amherst.

Robert King, editor in chief of the Journal of Monetary Economics and a visiting scholar at the Richmond Federal Reserve Bank, dismisses the notion that his journal was influenced by its Fed connections. “I think that the suggestion is a silly one, based on my own experience at least,” he wrote in an e-mail. (His full response is at the bottom.)

Galbraith, a Fed critic, has seen the Fed’s influence on academia first hand. He and co-authors Olivier Giovannoni and Ann Russo found that in the year before a presidential election, there is a significantly tighter monetary policy coming from the Fed if a Democrat is in office and a significantly looser policy if a Republican is in office. The effects are both statistically significant, allowing for controls, and economically important.

They submitted a paper with their findings to the Review of Economics and Statistics in 2008, but the paper was rejected. “The editor assigned to it turned out to be a fellow at the Fed and that was after I requested that it not be assigned to someone affiliated with the Fed,” Galbraith says.

Publishing in top journals is, like in any discipline, the key to getting tenure. Indeed, pursuing tenure ironically requires a kind of fealty to the dominant economic ideology that is the precise opposite of the purpose of tenure, which is to protect academics who present oppositional perspectives.

And while most academic disciplines and top-tier journals are controlled by some defining paradigm, in an academic field like poetry, that situation can do no harm other than to, perhaps, a forest of trees. Economics, unfortunately, collides with reality — as it did with the Fed’s incorrect reading of the housing bubble and failure to regulate financial institutions. Neither was a matter of incompetence, but both resulted from the Fed’s unchallenged assumptions about the way the market worked.

Even the late Milton Friedman, whose monetary economic theories heavily influenced Greenspan, was concerned about the stifled nature of the debate. Friedman, in a 1993 letter to Auerbach that the author quotes in his book, argued that the Fed practice was harming objectivity: “I cannot disagree with you that having something like 500 economists is extremely unhealthy. As you say, it is not conducive to independent, objective research. You and I know there has been censorship of the material published. Equally important, the location of the economists in the Federal Reserve has had a significant influence on the kind of research they do, biasing that research toward noncontroversial technical papers on method as opposed to substantive papers on policy and results,” Friedman wrote.

Greenspan told Congress in October 2008 that he was in a state of “shocked disbelief” and that the “whole intellectual edifice” had “collapsed.” House Committee on Oversight and Government Reform Chairman Henry Waxman (D-Calif.) followed up: “In other words, you found that your view of the world, your ideology, was not right, it was not working.”

“Absolutely, precisely,” Greenspan replied. “You know, that’s precisely the reason I was shocked, because I have been going for 40 years or more with very considerable evidence that it was working exceptionally well.”

But, if the intellectual edifice has collapsed, the intellectual infrastructure remains in place. The same economists who provided Greenspan his “very considerable evidence” are still running the journals and still analyzing the world using the same models that were incapable of seeing the credit boom and the coming collapse.

Rosner, the Wall Street analyst who foresaw the crash, says that the Fed’s ideological dominance of the journals hampered his attempt to warn his colleagues about what was to come. Rosner wrote a strikingly prescient paper in 2001 arguing that relaxed lending standards and other factors would lead to a boom in housing prices over the next several years, but that the growth would be highly susceptible to an economic disruption because it was fundamentally unsound.

He expanded on those ideas over the next few years, connecting the dots and concluding that the coming housing collapse would wreak havoc on the collateralized debt obligation (CDO) and mortgage backed securities (MBS) markets, which would have a ripple effect on the rest of the economy. That, of course, is exactly what happened and it took the Fed and the economics field completely by surprise.

“What you’re doing is, actually, in order to get published, having to whittle down or narrow what might otherwise be oppositional or expansionary views,” says Rosner. “The only way you can actually get in a journal is by subscribing to the views of one of the journals.”

When Rosner was casting his paper on CDOs and MBSs about, he knew he needed an academic economist to co-author the paper for a journal to consider it. Seven economists turned him down.

“You don’t believe that markets are efficient?” he says they asked, telling him the paper was “outside the bounds” of what could be published. “I would say ‘Markets are efficient when there’s equal access to information, but that doesn’t exist,’” he recalls.

The CDO and MBS markets froze because, as the housing market crashed, buyers didn’t trust that they had reliable information about them — precisely the case Rosner had been making.

He eventually found a co-author, Joseph Mason, an associate Professor of Finance at Drexel University LeBow College of Business, a senior fellow at the Wharton School, and a visiting scholar at the Federal Deposit Insurance Corporation. But the pair could only land their papers with the conservative Hudson Institute. In February 2007, they published a paper called “How Resilient Are Mortgage Backed Securities to Collateralized Debt Obligation Market Disruptions?” and in May posted another, “How Misapplied Bond Ratings Cause Mortgage Backed Securities and Collateralized Debt Obligation Market Disruptions.”

Together, the two papers offer a better analysis of what led to the crash than the economic journals have managed to put together – and they were published by a non-PhD before the crisis.

Not As Simple As A Pay-Off

Economist Rob Johnson serves on the UN Commission of Experts on Finance and International Monetary Reform and was a top economist on the Senate banking committee under both a Democratic and Republican chairman. He says that the consulting gigs shouldn’t be looked at “like it’s a payoff, like money. I think it’s more being one of, part of, a club — being respected, invited to the conferences, have a hearing with the chairman, having all the prestige dimensions, as much as a paycheck.”

The Fed’s hiring of so many economists can be looked at in several ways, Johnson says, because the institution does, of course, need talented analysts. “You can look at it from a telescope, either direction. One, you can say well they’re reaching out, they’ve got a big budget and what they’re doing, I’d say, is canvassing as broad a range of talent,” he says. “You might call that the ‘healthy hypothesis.’”

The other hypothesis, he says, “is that they’re essentially using taxpayer money to wrap their arms around everybody that’s a critic and therefore muffle or silence the debate. And I would say that probably both dimensions are operative, in reality.”

To get a mainstream take, HuffPost called monetary economists at random from the list as members of the AEA. “I think there is a pretty good number of professors of economics who want a very limited use of monetary policy and I don’t think that that necessarily has a negative impact on their careers,” said Ahmed Ehsan, reached at the economics department at James Madison University. “It’s quite possible that if they have some new ideas, that might be attractive to the Federal Reserve.”

Ehsan, reflecting on his own career and those of his students, allowed that there is, in fact, something to what the Fed critics are saying. “I don’t think [the Fed has too much influence], but then my area is monetary economics and I know my own professors, who were really well known when I was at Michigan State, my adviser, he ended up at the St. Louis Fed,” he recalls. “He did lots of work. He was a product of the time…so there is some evidence, but it’s not an overwhelming thing.”

There’s definitely prestige in spending a few years at the Fed that can give a boost to an academic career, he added. “It’s one of the better career moves for lots of undergraduate students. It’s very competitive.”

Press officers for the Federal Reserve’s board of governors provided some background information for this article, but declined to make anyone available to comment on its substance.

The Fed’s Intolerance For Dissent

When dissent has arisen, the Fed has dealt with it like any other institution that cherishes homogeneity.

Take the case of Alan Blinder. Though he’s squarely within the mainstream and considered one of the great economic minds of his generation, he lasted a mere year and a half as vice chairman of the Fed, leaving in January 1996.

Rob Johnson, who watched the Blinder ordeal, says Blinder made the mistake of behaving as if the Fed was a place where competing ideas and assumptions were debated. “Sociologically, what was happening was the Fed staff was really afraid of Blinder. At some level, as an applied empirical economist, Alan Blinder is really brilliant,” says Johnson.

In closed-door meetings, Blinder did what so few do: challenged assumptions. “The Fed staff would come out and their ritual is: Greenspan has kind of told them what to conclude and they produce studies in which they conclude this. And Blinder treated it more like an open academic debate when he first got there and he’d come out and say, ‘Well, that’s not true. If you change this assumption and change this assumption and use this kind of assumption you get a completely different result.’ And it just created a stir inside–it was sort of like the whole pipeline of Greenspan-arriving-at-decisions was
disrupted.”

It didn’t sit well with Greenspan or his staff. “A lot of senior staff…were pissed off about Blinder — how should we say? — not playing by the customs that they were accustomed to,” Johnson says.

And celebrity is no shield against Fed excommunication. Paul Krugman, in fact, has gotten rough treatment. “I’ve been blackballed from the Fed summer conference at Jackson Hole, which I used to be a regular at, ever since I criticized him,” Krugman said of Greenspan in a 2007 interview with Pacifica Radio’s Democracy Now! “Nobody really wants to cross him.”

An invitation to the annual conference, or some other blessing from the Fed, is a signal to the economic profession that you’re a certified member of the club. Even Krugman seems a bit burned by the slight. “And two years ago,” he said in 2007, “the conference was devoted to a field, new economic geography, that I invented, and I wasn’t invited.”

Three years after the conference, Krugman won a Nobel Prize in 2008 for his work in economic geography.

One Journal, In Detail

The Huffington Post reviewed the mastheads of the American Journal of Economics, the Journal of Economic Perspectives, Journal of Economic Literature, the American Economic Journal: Applied Economics, American Economic Journal: Economic Policy, the Journal of Political Economy and the Journal of Monetary Economics.

HuffPost interns Googled around looking for resumes and otherwise searched for Fed connections for the 190 people on those mastheads. Of the 84 that were affiliated with the Federal Reserve at one point in their careers, 21 were on the Fed payroll even as they served as gatekeepers at prominent journals.

At the Journal of Monetary Economics, every single member of the editorial board is or has been affiliated with the Fed and 14 of the 26 board members are presently on the Fed payroll.

After the top editor, King, comes senior associate editor Marianne Baxter, who has written papers for the Chicago and Minneapolis banks and was a visiting scholar at the Minneapolis bank in ‘84, ‘85, at the Richmond bank in ‘97, and at the board itself in ‘87. She was an advisor to the president of the New York bank from ‘02-’05. Tim Geithner, now the Treasury Secretary, became president of the New York bank in ‘03.

The senior associate editors: Janice C Eberly was a Fed visiting-scholar at Philadelphia (’94), Minneapolis (’97) and the board (’97). Martin Eichenbaum has written several papers for the Fed and is a consultant to the Chicago and Atlanta banks. Sergio Rebelo has written for and was previously a consultant to the board. Stephen Williamson has written for the Cleveland, Minneapolis and Richmond banks, he worked in the Minneapolis bank’s research department from ‘85-’87, he’s on the editorial board of the Federal Reserve Bank of St. Louis Review, is the co-organizer of the ‘09 St. Louis Federal Reserve Bank annual economic policy conference and the co-organizer of the same bank’s ‘08 conference on Money, Credit, and Policy, and has been a visiting scholar at the Richmond bank ever since ‘98.

And then there are the associate editors. Klaus Adam is a visiting scholar at the San Francisco bank. Yongsung Chang is a research associate at the Cleveland bank and has been working with the Fed in one position or another since ‘01. Mario Crucini was a visiting scholar at the Federal Reserve Bank of New York in ‘08 and has been a senior fellow at the Dallas bank since that year. Huberto Ennis is a senior economist at the Federal Reserve Bank of Richmond, a position he’s held since ‘00. Jonathan Heathcote is a senior economist at the Minneapolis bank and has been a visiting scholar three times dating back to ‘01.

Ricardo Lagos is a visiting scholar at the New York bank, a former senior economist for the Minneapolis bank and a visiting scholar at that bank and Cleveland’s. In fact, he was a visiting scholar at both the Cleveland and New York banks in ‘07 and ‘08. Edward Nelson was the assistant vice president of the St Louis bank from ‘03-’09.

Esteban Rossi-Hansberg was a visiting scholar at the Philadelphia bank from ‘05-’09 and similarly served at the Richmond, Minneapolis and New York banks.

Pierre-Daniel Sarte is a senior economist at the Richmond bank, a position he’s held since ‘96. Frank Schorfheide has been a visiting scholar at the Philadelphia bank since ‘03 and at the New York bank since ‘07. He’s done four such stints at the Atlanta bank and scholared for the board in ‘03. Alexander Wolman has been a senior economist at the Richmond bank since 1989.

Here is the complete response from King, the journal’s editor in chief: “I think that the suggestion is a silly one, based on my own experience at least. In a 1988 article for AEI later republished in the Federal Reserve Bank of Richmond Review, Marvin Goodfriend (then at FRB Richmond and now at Carnegie Mellon) and I argued that it was very important for the Fed to separate monetary policy decisions (setting of interest rates) and banking policy decisions (loans to banks, via the discount window and otherwise). We argued further that there was little positive case for the Fed to be involved in the latter: broadbased liquidity could always be provided by the former. We also argued that moral hazard was a cost of banking intervention.

“Ben Bernanke understands this distinction well: he and other members of the FOMC have read my perspective and sometimes use exactly this distinction between monetary and banking policies. In difficult times, Bernanke and his fellow FOMC members have chosen to involve the Fed in major financial market interventions, well beyond the traditional banking area, a position that attracts plenty of criticism and support. JME and other economics major journals would certainly publish exciting articles that fell between these two distinct perspectives: no intervention and extensive intervention. An upcoming Carnegie-Rochester conference, with its proceeding published in JME, will host a debate on ‘The Future of Central Banking’.

“You may use only the entire quotation above or no quotation at all.”

Auerbach, shown King’s e-mail, says it’s just this simple: “If you’re on the Fed payroll there’s a conflict of interest.”

UPDATE: Economists have written in weighing in on both sides of the debate. Here are two of them.

Stephen Williamson, the Robert S. Brookings Distinguished Professor in Arts and Sciences at Washington University in St. Louis:

Since you mentioned me in your piece on the Federal Reserve System, I thought I would drop you a note, as you clearly don’t understand the relationship between the Fed and some of the economists on its payroll. I have had a long relationship with the Fed, and with other central banks in the world, including the Bank of Canada. Currently I have an academic position at Washington University in St. Louis, but I am also paid as a consultant to the Federal Reserve Banks of Richmond and St. Louis. In the past, I was a full-time economist at the Bank of Canada and at the Federal Reserve Bank of Minneapolis.

As has perhaps become clearer in the last year, economics and the science of monetary policy is a complicated business, and the Fed needs all the help it can get. The Fed is perhaps surprisingly open to new ideas, and ideas that are sometimes in conflict with the views of its top people. One of the strengths of the Federal Reserve System is that the regional Federal Reserve Banks have a good deal of independence from the Board of Governors in Washington, and this creates a healthy competition in economic ideas within the system. Indeed, some very revolutionary ideas in macroeconomics came out of the intellectual environment at the Federal
Reserve Bank of Minneapolis in the 1970s and 1980s. That intellectual environment included economists who worked full-time for the Fed, and others who were paid consultants to the Fed, but with full-time academic positions. Those economists were often sharply critical of accepted Fed policy, and they certainly never seemed to suffer for it; indeed they were
rewarded.

I have never felt constrained in my interactions with Fed economists (including some Presidents of Federal Reserve Banks). They are curious, and willing to think about new ideas. I am quite willing to bite the hand that feeds me, and have often chewed away quite happily. They keep paying me, so they must be happy about the interaction too.

A former Fed economist disagreed. “I was an economist at the Fed for more than ten years and kept getting in trouble for things I’m proud of. I hear you, loud and clear,” he said, asking not to be quoted by name for, well, the reasons laid out above.

Elyse Siegel, Julian Hattem, Jeff Muskus and Jenna Staul contributed to this report

Ryan Grim is the author of This Is Your Country On Drugs: The Secret History of Getting High in America

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Today thousands of signatures were delivered to the offices of Tennessee Congressman John Tanner and United States Senators for Tennessee Bob Corker and Lamar Alexander by non-partisan constituents in a grass roots effort to encourage an audit of the Federal Reserve Bank (Fed), who some claim caused the financial crisis. Locally, handwritten, independent signatures were delivered to the Jackson Congressional offices numbering in the hundreds. This is not surprising since according to a recent Rasmussen Reports national phone survey, “75% of Americans favor auditing the Federal Reserve and making the results available to the public.”¹

Audit the Federal Reserve Legislation, HR 1207 and S 604, are gaining widespread bipartisan support in both the House and Senate, but neither John Tanner nor Senators Corker nor Senator Alexander have yet to sign on to the legislation. Current bipartisan support includes, Lynn Woolsey (D-CA), co-chair of the Progressive Caucus; Stephanie Sandlin (D-SD), chair of the Blue Dog Coalition; Ron Paul (R-TX), the bill’s sponsor; and Pete Sessions (R-TX), chair of the Republican Congressional Campaign Committee.

According to Senator Bernie Sanders, the Federal Reserve has pumped $2.2 Trillion² into the economy recently, no one outside the Fed knows where it has gone, and the Fed won’t say. Since 1913 the dollar has depreciated by 95%³ according to the American Institute for Economics (AIER) and statistics by the Bureau of Labor Statistics. The Fed has been charged by Congress with maintaining a stable currency, which they have obviously not done. According to the Constitution, Congress is to regulate a sound currency, but they gave this duty over to the Federal Reserve Bank, a for profit entity, in 1913. President Wilson, who helped ratify the Federal Reserve Act stated the following years later regarding the Act, “I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated Governments in the civilized world no longer a Government by free opinion, no longer a Government by conviction and the vote of the majority, but a Government by the opinion and duress of a small group of dominant men.” President Andrew Jackson vigilantly fought the International Banks attempt to take over the US monetary system and stopped the international bankers for nearly 100 years. However, he knew his work was not complete. He stated, “But it will require steady and persevering exertions on your part to rid yourselves of the iniquities and mischiefs of the paper system and to check the spirit of monopoly and other abuses which have sprung up with it, and of which it is the main support. So many interests are united to resist all reform on this subject that you must not hope the conflict will be a short one nor success easy. My humble efforts have not been spared during my administration of the Government to restore the constitutional currency of gold and silver, and something, I trust, has been done toward the accomplishment of this most desirable object; but enough yet remains to require all your energy and perseverance. The power, however, is in your hands, and the remedy must and will be applied if you determine upon it.” Recently Warren Buffet commented on the result of the Fed’s monetary injection in a New York Times op-ed stating, “Legislators will correctly perceive that either raising taxes or cutting expenditures will threaten their re-election. To avoid this fate, they can opt for high rates of inflation, which never require a recorded vote and cannot be attributed to a specific action that any elected official takes. In fact, John Maynard Keynes long ago laid out a road map for political survival amid an economic disaster of just this sort: ‘By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens…. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.’ In fact, Inflation is a tax that is hidden from the people and while it has been slowly killing our currency for nearly a century, the current rate of monetary injection is completely unacceptable.”^{4
1. http://www.rasmussenreports.com/public_content/business/general_business/july_2009/75_favor_auditing_the_fed 2. http://www.youtube.com/watch?v=kUJIG3JNPk0 3. http://www.aier.org/research/commentaries/1826-the-long-goodbye-the-declining-purchasing-power-of-the-dollar 4. http://www.nytimes.com/2009/08/19/opinion/19buffett.html?_r=3&pagewanted=1}

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Summary – As the financial crisis continues, the U.S. Congress is considering a bill that would jeopardize the independence of the Federal Reserve. This is a shame. Monetary policy should be protected from congressional politics.

ALAN S. BLINDER is Gordon S. Rentschler Memorial Professor of Economics and Public Affairs at Princeton University and Director of Princeton’s Center for Economic Policy Studies. He served on the White House Council of Economic Advisers from 1993 to 1994 and as Vice Chairman of the Board of Governors of the Federal Reserve System from 1994 to 1996.

In the midst of the ongoing financial crisis, Congress is now considering a bill that would subject the Federal Reserve to congressional audits. It would be a shame to let that happen. Some functions of government properly belong in the realm of technocracy (for example, drug approvals), and others belong in the realm of politics (for example, same-sex marriage). I first argued in the November/December 1997 issue of Foreign Affairs that the U.S. government was placing too many decisions in the political realm and too few in the technocratic one. In the 12 years since, I have become increasingly convinced of this.

The thought back then was inspired by the apparent success of the Federal Reserve System. A noteworthy creation of the Progressive Era, the Fed was designed to conduct monetary policy on decidedly nonpolitical grounds: it has only a vague legal mandate from Congress — to pursue both “stable prices” and “maximum employment” — and nearly complete discretion to fulfill its mission as it sees fit. Over the years, the Fed, protected from partisan political concerns, has been able to run a very capable — which is not to say perfect — monetary policy, almost certainly keeping inflation lower than politicians would have. Yet, despite this success, few, if any, U.S. government agencies today enjoy anything remotely close to the Fed’s degree of insulation from politics. Maybe, I suggested in 1997, more should.

Since then, the Fed has scored some spectacular successes. It averted financial calamity in the United States as economies faltered throughout Asia in 1997-98; it steered the country through the post-2000 stock market crash with minimal damage; and, most recently, it took extraordinary measures to avert what its chair, Ben Bernanke, said might have become the Great Depression 2.0. But it has also suffered some spectacular failures. For example, it did not properly supervise banks in the run-up to the current crisis, nor did it protect consumers from predatory mortgage lenders.

Ironically, both the Federal Reserve’s failure to prevent the crisis and its remarkable success in pulling the economy back from the brink have fueled Congress’ hostility. Since it proved to be a poor regulator, some legislators are reasonably asking why they should give it additional regulatory powers, as the Obama administration’s reform plan proposes. Others have accused the Fed of usurping congressional authority by engaging in back-door appropriations of taxpayer funds — for example, when it used emergency loans to facilitate Bear Stearns’ purchase by JPMorgan Chase and propped up AIG in 2008.

Congress’ ire cuts across party lines, but it has been crystallized by Ron Paul (R-Tex.), an extreme libertarian and longtime foe of the Fed. He has, incredibly, persuaded almost two-thirds of the House of Representatives to co-sponsor a bill that would jeopardize the Fed’s independence. The bill is titled, innocently enough, the Federal Reserve Transparency Act, which sounds like something everyone should favor. In fact, many have long advocated greater Federal Reserve transparency. And, incidentally, the Fed has become substantially more transparent over the past decade, such as by issuing explanatory statements with each policy decision and revealing more about its internal economic forecasts.

Continue at Foreign Affairs…

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Powerful House Financial Services Committee chairman says central bank’s lending powers to be ‘curtailed’

Congressman Barney Frank (D-MA), one of the most unabashed liberals in the U.S. House of Representatives, told a Massachusetts town hall recently that Texas Republican Congressman Ron Paul’s bill to audit the Federal Reserve bank will clear his chamber by October.

Over half of the House members, most of them Republican, have signed on to the bill, H.R. 1207.

Though Frank disagrees — as many proponents of the bill contend — that the Fed is the cause of the U.S. dollar’s shrinking value, he told a Massachusetts audience that he’s been a proponent of greater transparency at the nation’s central bank for some time.

“Here’s what we plan to do: I want to restrict the powers of the Federal Reserve in a number of ways,” he said. “First of all, they will be the major losers of power if we’re successful, as I believe we will be, setting up that, uh, financial product protection committee.”

The committee Frank mentioned was proposed by President Barack Obama during the campaign, as a way of protecting consumers. It was formally presented to Congress in the President’s financial regulatory reform white papers in July, noted law firm Wiley Rein LLP.

“The Federal Reserve is now charged with protecting consumers,” continued Frank. “They were supposed to do sub-prime mortgage restricted … Congress in 1994 gave the Federal Reserve the power to adopt rules to ban bad sub-prime mortgages. … They have the power to ban credit card abuses. They have the power to do most of it. They, under Greenspan, did nothing.

“Under Bernanke, they started to do things, but only after Congress started, when I became chairman of the [House Financial Services Committee], we began to act on these things: Sub-prime mortgages, credit cards, overdraft … And after we started, the Fed did. So, that’s why one of the reasons why in the new consumer protection agency we will take away from the Federal Reserve the power to do consumer protection.”

Frank added that Congress will reverse an action by the Democratic Congress of 1932 that gives the Fed authority to lend money at will.

“Under section 13.3 of the Federal Reserve Act, they can lend money to whoever they want,” he said. “We are going to curtail that lending power. We are going to put some constraints on it.”

He concluded: “Finally, we are going to subject them to a complete audit. I’ve been working with Ron Paul, the main sponsor of that bill …” Several in the audience applauded. “He believes that we don’t want to have the audit appear as if it is influencing monetary policy because that would be inflationary … One of the things that will show you is what the Federal Reserve buys and sells. That will be made public, but not instantly. If it were instant, you would have a lot of people trading off that and it would have too much impact on the market. Again, Ron agrees with that. So, we will probably have that data released after a time period of several months — enough time so it won’t be market sensitive.”

Danger in transparency?

The pervasive argument against transparency at the nation’s central banking institution was repeated by Treasury Secretary Tim Geithner during a recent dialog with popular social bookmarking Web site Digg.com.

Geithner said that he’s sure “people understand that you want to keep politics out of monetary policy,” adding that auditing the Fed is “a line that we do not want to cross” because of the possible danger to the U.S. economy.

The argument is strikingly similar to one posed by the Federal Reserve’s legal counsel in a Freedom of Information Act lawsuit filed by Bloomberg News in an attempt to force disclosure of the institutions that received billions in bailout money.

Loretta Preska, chief judge of the Manhattan U.S. District Court, ruled Monday that the Fed had “improperly withheld agency records” in response to the FOIA request, adding that the argument of danger to the economy was based merely on “conjecture” and not evidence.

“[The] risk of looking weak to competitors and shareholders is an inherent risk of market participation; information tending to increase that risk does not make the information privileged or confidential,” she wrote.

Opposition to Fed powers growing

Eliot Spitzer, the disgraced former Governor and Attorney General of New York — at one time known as the “sheriff” of Wall Street — has assaulted the bank bailouts as “America’s greatest theft and cover-up ever” and called the Federal Reserve bank a “Ponzi scheme” that must be held accountable for its actions.

Additionally, the House Domestic Policy Subcommittee plans to probe how the Troubled Asset Relief Program’s (TARP) funds were dispersed by the Fed. Expressing his frustration before the Government and Oversight Committee, Congressman Dennis Kucinich (D-OH) suggested that the Federal Reserve may be paying banks to hoard money and avoid making loans, instead of using the TARP funds to keep people in their homes.

To support his assertion, Kucinich cited a Bloomberg report which noted that “banks’ excess reserves at the Fed rose to a record $877.1 billion daily average in the two weeks ended May 20, from $2 billion a year earlier.

“Excess reserves — money available for lending that banks choose to leave with the Fed instead — averaged $743.9 billion in the first two weeks of this month,” the report continued.

“First, Congress was told that TARP was for the purchase of toxic assets, to help keep people in their homes,” the Congressman said. “Then the Bush Administration switched the program. Next, Congress was told that the TARP funds were instead needed to bail out the banks, in the form of a direct capital infusion, to keep credit markets alive.”

In a media advisory, Kucinich added: “If TARP isn’t about keeping people in their homes or providing credit to businesses, what is it for? I think the vast majority of Americans would be outraged to learn their tax dollars were facilitating hoarding at the Fed and increased profit making for banks.”

Kucinich’s Domestic Policy Subcommittee has also undertaken an investigation on the Fed’s bailout of the Bank of American-Merrill Lynch merger. “Specific documents subpoenaed include emails, notes of conversations and other documents,” his office noted.

“You look at the governing structure of the New York [Federal Reserve], it was run by the very banks that got the money,” said Eliot Spitzer told MSNBC’s Morning Meeting host Dylan Ratigan in late July. “This is a Ponzi scheme, an inside job. It is outrageous, it is time for Congress to say enough of this. And to give them more power now is crazy. The Fed needs to be examined carefully.”

Concluding his answer to the question of auditing the Federal Reserve, Rep. Frank told the Massachusetts audience: “The House will pass [H.R. 1207] probably in October.”

This video was uploaded to YouTube by user VegasBD on August 28, 2009.

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NEW YORK – The Internal Revenue Service announced Wednesday that it has reached a deal with the Swiss government, gaining access to thousands of UBS AG accounts that Americans might have used to avoid paying taxes.

The announcement is the result of a settlement that the IRS and Switzerland-based UBS reached earlier this month to track down and identify wealthy Americans who have avoided paying taxes by hiding their assets in offshore accounts. Shulman said the deal should deter Americans from evading taxes in the future.

“Thousands of taxpayers who avoided paying taxes in the past are being brought into compliance,” said Shulman. “As this agreement demonstrates, the world of international taxes has drastically changed.”

Shulman said that investors can still “get right with their” government by reporting their tax activity by the Sept. 23 voluntary disclosure deadline.

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President Obama, this is now your opportunity to be a great President like Jackson, Lincoln and Kennedy. Great Presidents do Great things! They have great Honor and Integrity! We know you can do it! “We the People” know the truth! We want to hear it from you! Please join U.S.! Tell the American people the Truth! Confess! Americans are forgiving! We feel if this took place, a renewed Spirit of Patriotism could spread through our government! The American people have never lost our Spirit of Patriotism! We never will! Join U.S.!

“Few men have virtue to withstand the highest bidder.” –George Washington

President Obama, You owe nothing to the manipulators who bought your way into office. Those people only used you! Americans do not want to use you. People have been using you and lying to you all your life.

You Have to Betray Them or Betray the U.S.A.!     What’s Your Choice? 

Look at the people of the United States. We are real! We are good people! We are intelligent and can think! The elitist mind is really small and weak! The elitist people are selfish and twisted. We just want a President with Honor and Integrity. This is your big chance to become the Greatest President of all time! You need to lead our government by example, with Honor and Integrity! President Obama just do the right thing! Join “We the People” of the U.S.A.!

“Experience has shown that even under the best forms of government those entrusted with power have, in time, and by slow operations, perverted it into tyranny.” -Thomas Jefferson

Let’s sever once and for all our evil alliance with “The Fed Scam.” You know the truth; please explain the truth to the rest of America! Its right and it’s honorable! America will back you and help you fight these lowest of all life form leaches. Let’s fast- track the final ending of “The Fed Scam” and Cut Off Its Ugly Head Once And For All! This is true Greatness! Presidents Jackson, Lincoln and Kennedy had Honor and Integrity. They did the right thing! This is your big moment in time. Join U.S.!

President Obama:

Can you stand on your own?

Can you make your own decisions?

Can you be a man of Honor and Integrity?  

“When the people fear their government, there is tyranny; when the government fears the people, there is liberty.” -Thomas Jefferson

President Obama, We are tired of receiving deceptive emails trying to sell us ObamaCare. We are tired of the Whitehouse trying to sell us health care reform. You know, I know and the American people know this is really about more government power and control. You do know it’s the other way around; “We the People” control our government!  Our biggest problem has become our government! Stop! Just stop all this nonsense! Do not treat U.S. like we are stupid, ignorant morons! Join U.S.! Do Not Sell Out “We the People” of the U.S.A.! We Trusted You! 

If we have any other elected or appointed “public servant” leaders in our government who have any Honor or Integrity left inside them, they should come totally clean with “We the People”! If most of our leaders have any intestinal fortitude, then we should have a long line of them holding resignation papers in their hands or begging to ask our forgiveness! Do they no longer think they are accountable to U.S. and believe they can do whatever they please? They have developed a “spirit of insubordination” that has gotten way out of control!  We no longer need employees working for us that practice malfeasance in office.

“We The People are the rightful masters of both Congress and the courts, not to overthrow the Constitution but to overthrow the men who pervert the Constitution.”  -Abraham Lincoln

We need laws stating that any Representative, Senator or President that has the audacity to sign any bill without reading it and fully understanding it should go immediately to jail without any bond? We must raise the bar of Integrity and Honor for our employees! Elected or appointed “public servants” need to achieve a much higher standard. How did it get so low? If they are found guilty, a 30 year minimum sentences would not be out of line! This complete lack of responsibility is a very serious issue! It’s totally scandalous, outrages and just plain wrong! It’s Criminal! 

All of our government employees have taken an oath of office to protect the Constitution of the United States from all enemies, foreign and domestic? Do your job! We want Honor and Integrity!

We Must Never Again Allow Our Leaders to Have Unaccountable Trust!     EVER!!!

People are corruptible! We must always question and watch very closely everything they do! Our Freedom, Our beloved Constitution, Our National Sovereignty, “We the People” and the fact that we are a Constitutional Republic is why the United States of America is the Greatest Nation in the World! Any bad truths about our Country are the slow results of the corruptible human nature of a few individuals! Power and wealth can corrupt a person if not kept in check! After we fix our current problems, and we will, we must put in play many more “checks and balances”. We must figure out a way to completely take away the opportunity of corruption! Nothing personal – but “We the People” must always come first and be protected!

“We can all commiserate forever about how bad things have been, are, and will continue to be. But I don’t think that we can afford to wait for elections in order to have our say about putting a stop to this madness. Enough, already! Let’s start talking treason, prison, and death penalties for all malefactors in government who subvert, ignore, skirt and otherwise trash the Constitution of these United States of America. Those who have sworn to uphold the Constitution and have then ignored their oaths of office are guilty of perjury and malfeasance in office.” -Stephen A. Langford (personal communication to this author) 

The Only Real Financial Crisis of the U.S.A. is Hiding in the Audit of “The Fed Scam”!

The most conniving, low life, manipulators in all of history put “The “Fed Scam” together! Since its inception in 1913, “The Fed Scam” has helped to devalue our dollar by 95%. During the recent economic crisis, it has poured TRILLIONS of dollars into the economy with no oversight, has made secret agreements with foreign banks and governments, and has refused to tell Congress or the American Public who is getting our money. They have the power to print it, but it is not their money! They are blood-sucking thieves. This is our money!

Anybody Who Supports “The Fed Scam” is Clearly a Traitor to
“We the People” of the United States Of America!

Check this out!  This is crazy!     http://www.usdebtclock.org/

Thomas D Dowling

http://waronyou.com/topics/end-%E2%80%9Cthe-fed-scam%E2%80%9D-now/

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But Keiser’s documentary may be sensational for getting an acknowledgement from the German central bank, the Bundesbank, that Germany’s gold reserves are actually in the custody of the United States. This is a detail the Bundesbank long has denied to others who have inquired and is potentially a matter of great controversy in Germany. It raises the question of whether the German gold reserves are actually intact at all or whether they have been used by the U.S. government as part of its long-time gold price suppression scheme or have been comingled and diminished with the gold reserves of other countries held in the United States.

While Keiser’s documentary does not identify the Bundesbank spokesman who confirmed the transfer of the German gold reserves to New York, it does provide the date and location of the confirmation: March 17, 2008, at Bundesbank headquarters in Frankfurt. The documentary shows that Keiser was there and got the interview.

After his interview at the Bundesbank, Keiser remarks: “The most fascinating thing I’ve heard is that all the gold in Germany is in New York.” Indeed.

Keiser’s documentary is titled “Brown’s Bottom” and you can watch it at here:

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The Federal Reserve Bank is Set Up as a Privately Owned Banking Cartel

Controlled by a Small Elitist Group of Powerful International Bankers. 

This Same Cartel Owns Other Central Banking Systems Worldwide

Including the IMF (International Monetary Fund) and World Bank. 

End “The Fed Scam” Now!       No More “Banksters”! 

“I am concerned for the security of our great Nation; not so much because of any threat from without, but because of the insidious forces working from within.” –Douglas MacArthur

The Only Real Financial Crisis Of The U.S.A.

Is Hiding In The Audit Of “The Fed Scam”!

This is a VERY PUBLIC MATTER!

Audit “The Fed Scam” bills HR 1207 must pass in The House and S 604 must pass in The Senate Immediately! Any Representative or Senator that does not vote in favor of and support these bills or Tries to “Water-Down” or STALL these bills is clearly a Traitor and “Sold Out” the United States of America!

If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks…will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered…. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.” –Thomas Jefferson

We Are A Sovereign Nation!  A Constitutional Republic!

“We the People” need to keep a real close eye on all our government “public servant” employees. Our government was set up to serve U. S. and we no longer want any secrets about OUR money.

Does our government think that “We the People” are now here to serve them? Are they out of their minds?

Some of our leaders today have acquired a very “twisted” view of their roles. Do they understand that The Constitution of the United States was written with a spirit of honor and integrity because our “Forefathers” were humble “public servants”? Do we now have those who can no longer handle the power we entrusted them? Why have they abused and taken advantage of us? Do they no longer think they are accountable to us and believe they can do whatever they please? Our “public servants” have developed a “Spirit of Insubordination” and have gotten way out of control!

This has to stop right now! This is ridiculous! If they do not want to listen to and serve us wholeheartedly, we no longer need them! “We the People” of the United States need to do a major house cleaning of our “public servants” immediately! Enough is Enough!

“Experience has shown that even under the best forms of government those entrusted with power have, in time, and by slow operations, perverted it into tyranny.” –Thomas Jefferson

Were you shocked and upset at Bernard Madoff, the disgraced financier who was handed down a $171 billion forfeiture order? Federal prosecutors said Madoff orchestrated perhaps the largest financial swindle in history (Not Even Close!). Bernard Madoff is a measly amateur compared to “The Fed Scam Banksters”. This is a “drop in the bucket” in comparison. Do you understand that within our own government there are those who would steal or have already let others steal from us? Is it our fault, for being so trusting and not making all our high-level government employees more accountable?

No, it’s the fault of our lowlife, greedy American cockroach leaders who have betrayed us!

“Few men have virtue to withstand the highest bidder.” –George Washington

It’s time for “We the People” of the United States of America to get VERY ANGRY!

Our Country’s biggest enemy attacks from within!

Donald Kohn who is the vice-president of “the Fed Scam’s” board has actually threatened Congress on raising the interest rates if they don’t stop the Ron Paul Movement to Audit “The Fed Scam”. This blatant kind of arrogance from unscrupulous people like this really burns me up! Do our government leaders now understand they are totally exposed? “We the People” have figured everything out! Maybe Donald Kohn should be the first person arrested! After him, the rest of this “gang of hoodlums” needs to be investigated immediately:

Ben Bernanke, the Chairman of the Board of Governors of “the Fed Scam”, Nancy Pelosi, Speaker of the House, Harry Reid, Majority Leader of the Senate, Barney Frank, House Finance Chairman, Tim Geithner, Treasury Secretary, Rahm Emanuel, Chief of Staff, all The Owners of “The Fed Scam”, including “The Fed Scam’s” international banking owners from around the world and the administration of all twelve regional “Fed Scam” Banks.

Anybody who supports “The Fed Scam” is Clearly a Traitor to
“We the People” of the United States of America!

“We can all commiserate forever about how bad things have been, are, and will continue to be. But I don’t think that we can afford to wait for elections in order to have our say about putting a stop to this madness. Enough, already! Let’s start talking treason, prison, and death penalties for all malefactors in government who subvert, ignore, skirt and otherwise trash the Constitution of these United States of America. Those who have sworn to uphold the Constitution and have then ignored their oaths of office are guilty of perjury and malfeasance in office.” –Stephen A. Langford (personal 19 June 2009 communication to this author)

“We The People” Demand real Transparency, with open books and plenty of civilian watchdog czars. Government czars are an insult to the intelligence of the American people! We no longer want any misguided governmental arrogance directed at us!

“The time is near at hand which must determine whether Americans are to be free men or slaves.” –George Washington

Many of are entrusted government employees are a total disgrace to the United States of America! They only care about their own best interests!

“When the people fear their government, there is tyranny; when the government fears the people, there is liberty.” –Thomas Jefferson

We are now educated on banking and “The Fed Scam”. We understand interest rates. We understand terms like “fractional reserve banking” and “fiat money”. We know that “The Fed Scam” is set up as a privately owned “Banking Cartel” and that they use deception and doublespeak on us because they think Americans are ignorant morons! We understand the trickery and slight of hand! Shame on “The Fed Scam” for taking advantage of us! They are 100% accountable now! This is our money! They have betrayed us!

“Our Founders never would have tolerated its abusive power or methods of bribery. It is a detriment to not only the economy but also the very existence of a representative form of government and all Americans who want to experience true freedom.” –Chuck Norris (on “The Fed Scam”)

DO NOT STEAL from “We the People!”

We Want All Our Money Audited Now!

All The Way Back To 1913!

The Only Real Financial Crisis Of The U.S.A.

Is Hiding in the Auditing of “The Fed Scam”!

This is a VERY PUBLIC MATTER!

“History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by controlling money and its issuance.” –James Madison

See also Matthew 21:12
A Little Historical Dialog

1811: The charter for the Rothschild’s Bank of the United States runs out and Congress votes against its renewal. At the time Andrew Jackson (who would become the 7th President of the United States from 1829 to 1837) says,

“If Congress has a right under the Constitution to issue paper money, it was given them to use by themselves, not to be delegated to individuals or corporations.”

Nathan Mayer Rothschild is not amused and he stated,
“Either the application for renewal of the charter is granted, or the United States will find itself involved in a most disastrous war.”

Andrew Jackson’s response to this is to say,
“You are a den of thieves vipers, and I intend to rout you out, and by the Eternal God, I will rout you out.”

Nathan Mayer Rothschild’s reply to that being,
“Teach those impudent Americans a lesson. Bring them back to colonial status.”

Andrew Jackson was our only president that did not have the banking leeches stealing from us. On January 30, 1835 an assassin tried to shoot President Jackson, but miraculously both of the assassin’s pistols misfired. Andrew Jackson would later claim that he knew the Rothschild’s were responsible for that attempted assassination. He is not the only one, the assassin, Richard Lawrence, who was found not guilty by reason of insanity, later bragged that powerful people in Europe had hired him and promised to protect him if he were caught.

The most conniving, low life, manipulators in all of history put “The Fed Scam” together!  Their secrets are out! This is now mainstream news whether they like it or not! Since its inception in 1913, “The Fed Scam” has helped to devalue our dollar by 95%. During the recent economic crisis, it poured TRILLIONS of dollars into the economy with no oversight, has made secret agreements with foreign banks and governments, and has refused to tell Congress or the American Public who is getting our money. They have the power to print it, but it is not their money! They have betrayed us! This is our money! They are blood-sucking thieves!

“We The People are the rightful masters of both Congress and the courts, not to overthrow the Constitution but to overthrow the men who pervert the Constitution.” –Abraham Lincoln

The accepted version of history is that the Federal Reserve was created to stabilize our economy.

In November of 1910 a secret meeting on Jekyll Island off the coast of Georgia at a private resort owned by J.P. Morgan took place. This was the conception of “The Fed Scam” to set up a powerful cartel of international cutthroat bankers! Seven men attended this exclusive meeting where an estimated one-fourth of the total wealth of the entire world was represented.

1.) Henry P. Davidson, Sr. Partner of J.P. Morgan Company
2.) Charles D. Norton, President of 1st National Bank of New York
3.) Frank A. Vanderlip, President of the National City Bank of New York, representing William Rockefeller
4.) Benjamin Strong, head of J.P. Morgan’s Bankers Trust Company, later to become head of the System
5.) Paul M. Warburg, a partner in Kuhn, Loeb & Company, representing the Rothschild’s and Warburg’s in Europe
6.) A. Piatt Andrew, Assistant Secretary of the Treasury
7.)  Nelson W. Aldrich, Republican “whip” in the Senate, Chairman of the National Monetary Commission, father in law to John D. Rockefeller, Jr.

“Paul M. Warburg is probably the mildest-mannered man that ever personally conducted a revolution. It was a bloodless revolution: he did not attempt to rouse the populace to arms. He stepped forth armed simply with an idea. And he conquered. That’s the amazing thing. A shy, sensitive man, imposed his idea on a nation of a hundred million people.” –Harold Kellock (admiring biographer of Paul M. Warburg)

Nelson W. Aldrich & A. Piatt Andrew were a huge disgrace to our country and their families because they worked for the federal government. This is One Known case of government corruption in action at the highest of levels! Can you think of any spy or traitor in the history of the United States that has done worse damage and betrayed our country more than these men?

Those who attended represented the great financial institutions of Wall Street and, indirectly, Europe as well. The reason for secrecy was simple. Had it been known that rival fractions of the banking community had joined together, the public would have been alerted to the possibility that the “banksters” were plotting an agreement in restraint of trade – which, of course, is exactly what they were doing.

What emerged was a cartel agreement with five objectives:

1.) Stop the growing competition from the nation’s newer banks.
2.) Obtain a franchise to create money out of nothing for the purpose of lending.
3.) Get control of the reserves of the banks so that the more reckless ones would not be exposed to currency drains and bank runs.
4.) Get the taxpayer to pick up the cartel’s inevitable losses.
5.) Convince congress that the purpose was to protect the public.

It was realized that the “banksters” would have to become partners with the politicians and that the structure of the cartel would have to be a central bank.

The record shows that “The Fed Scam” has failed to achieve its stated objectives. That is because those were never its true goals. As a banking cartel, and in terms of the five objectives stated above, it has been an unqualified success.

The Rothschild’s influence in the United States banking was set up and dismantled a few times before they finally set up “The Fed Scam”. The United States government had a 10% partnership in the cartel and put up 10% in real money. The “banksters” put up almost nothing for their 90% stake in “The FedScam”. “The Fed Scam” would then lend the money they created out of nothing, charging interest. 90% of this money is created out of thin air!

Anybody Who Supports “The Fed Scam” is Clearly a Traitor to
“We the People” of the United States Of America!

Many past Presidents and their Administrations have completely “LET U.S. DOWN”. They allowed “The Fed Scam” to exist!

SHAME ON THEM!

Who Are The Current Owners of “The Fed Scam”?

While there may still be some smaller shareholders in the “The Fed Scam”, it is believed that the Federal Reserve is owned and controlled primarily by the following Central banks:

1.  Rothschild Bank of London
2.  Warburg Bank of Hamburg
3.  Chase Manhattan Bank of New York
4.  Warburg Bank of Amsterdam
5.  Rothschild Bank of Berlin
6.  Lehman Brothers of New York
7.  Lazard Brothers of Paris
8.  Kuhn Loeb Bank of New York
9.  Goldman Sachs of New York
10. Israel Moses Seif Banks of Italy

“THE FED SCAM” HAS TO BE ABOLISHED NOW!

The Federal Reserve Board is not “a thoroughly public entity.”  The Board of Governors is the part of the Federal Reserve System that is responsible for supervising the private banks. There are seven members on the board. Every two years, a new board member is appointed by the President of the United States and confirmed by the Senate to serve a 14 year term.

There are twelve “Fed Scam” Central Banks which are privately owned by a limited group of people from around the world. Congress was given the right to create and regulate the value of money in Article 1, Section 8 of the Constitution, but has delegated its power to ‘The Fed Scam” System. These banks create money, lend it back to us through our banks, and collect hundreds of billions of dollars in interest each year.

The Federal Reserve Act was passed in 1913, shortly after the 16th amendment was ratified. The 16th amendment allowed our country to collect the taxes required to pay the annual dividends to the Fed’s shareholders, who bought their original 300 shares for only $100 per share. By law, the United States can easily abolish the Fed by buying back these shares at a cost of “only” $450 million and replace the current national debt with non-interest bearing currency as it becomes due.

“The Government should create, issue, and circulate all the currency and credits needed to satisfy the spending power of the Government and the buying power of consumers. By the adoption of these principles, the taxpayers will be saved immense sums of interest. Money will cease to be master and become the servant of humanity.” –Abraham Lincoln

Despite these warnings, in 1913 Woodrow Wilson signed the 1913 Federal Reserve Act. A few years later he wrote:

“I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated Governments in the civilized world. No longer a Government by free opinion, no longer a Government by conviction and the vote of the majority, but a Government by the opinion and duress of a small group of dominant men.” - Woodrow Wilson

On June 04, 1963 President John F. Kennedy, (the 35th President of the United States; 1961- 1963) signed Executive Order 11110. This returned to the United States Government the Power to issue currency, without going through “The Fed Scam”. (Did he pay for that Order with his life?)

“The cost of freedom is always high, but Americans have always paid it. And one path we shall never choose, and that is the path of surrender, or submission.” – John F. Kennedy

End “The Fed Scam” Now!

Every day a huge amount of our money is lost! (Remember Interest.)  We need to do what Abraham Lincoln did and direct the Treasury Department to issue U.S. Notes to pay off all our national debt. Remember the “Greenbacks”?

We must never again allow private banks to create or control our money! Why should we pay interest on our money! We must never again allow our “public servants”, to keep any secrets about our money! Our big mistake was to trust our government. They can not be trusted! History has taught us this, over and over again. We have been warned over and over again. Why do you think we have so many economic problems now?

The Only Real Financial Crisis Of The U.S.A. Is Hiding In The Audit Of “The Fed Scam”!

“Power corrupts; absolute power corrupts absolutely” –Lord Acton

This issue is so important that you need to be further warned by the words of the “Banksters”. The “Banksters” believe that average Americans are just “simple” folks!

“The bank hath benefit of interest on all moneys which it creates out of nothing.” –William Paterson (founder of the Bank of England in 1694, then a privately owned bank)

“Let me issue and control a nation’s money and I care not who writes the laws.” –Mayer Amschel Rothschild (1744-1812, founder of the House of Rothschild).

“If my sons did not want wars, there would be none.” –Gutle Schnapper, wife of Mayer Amschel Rothschild’s –1849

“The few who understand the system will either be so interested in its profits or be so dependent upon its favors that there will be no opposition from that class, while on the other hand, the great body of people, mentally incapable of comprehending the tremendous advantage that capital derives from the system, will bear its burdens without complaint, and perhaps without even suspecting that the system is inimical to their interests.” – The Rothschild Brothers of London, writing to associates in New York, 1863 (Remember, these are the same people that have started major wars so they could finance both sides for large profits. Their ancestors are still controlling the International banks that still own most of “the Fed Scam”.)

Citizens of the U.S.A., read once again carefully the above quotes from some of your oldest and most cunning enemies and also note the dates! This is how long these monstrous leaches have been preying on U.S. This is how they look at us!

The infamous Rothschild clan financed John D. Rockefeller and the Standard Oil Company, J. P. Morgan – a major banker, Edward R. Harriman’s Railroad Empire, and Andrew Carnegie’s Steel Empire. Etc.  They have been in our pockets for many years. They live to control us! They have far-reaching global tentacles. To them and their kind, our mere existence is to serve them and to extend their power and control. The “Banksters” betray us! They have control of OUR MONEY!

WE DON’T WANT TO JUST AUDIT “THE FED SCAM”

WE WANT TO CUT OFF ITS UGLY HEAD ONCE AND FOR ALL!

“I am afraid the ordinary citizen will not like to be told that the banks can and do create money. And they who control the credit of the nation direct the policy of Governments and hold in the hollow of their hand the destiny of the people.” – Reginald McKenna, as Chairman of the Midland Bank, addressing stockholders in 1924.

“The modern banking system manufactures money out of nothing. The process is, perhaps, the most astounding piece of sleight of hand that was ever invented. Banks can in fact inflate, mint and un-mint the modern ledger-entry currency.” –Major L. L. B. Angus

Better to fight for something than live for nothing.” –George S. Patton

Our enemy has many goals for U.S.!

The enemy’s ultimate plan is to create a Global Currency! They want “We the People” to lose all our freedoms! They want us to give up on our beloved Constitution of the United States. They want us Americans to give up our National Sovereignty! First they want a North American Union, and then they want us to become part of a New World Order!

They want us to become part of their great collective! They want us to become a perfect world of worker bees! They believe in the perfection of their ideals because in their misguided little minds these “special” people have decided that they are the “chosen enlightened ones” that know what is best for all of U.S.!

“I believe there are more instances of the abridgment of freedom of the people by gradual and silent encroachments by those in power than by violent and sudden usurpations.” –James Madison

 
RON PAUL ROCKS!

Ron Paul is the most incredible person we have in government right now. He has had to humbly deal with all this arrogance and ignorance for us. Ron Paul has been telling “We the People” about “The Fed Scam” for 23 years.

Audit “The Fed Scam” bills HR 1207 must pass in The House and S 604 must pass in The Senate immediately! Any Representative or Senator that does not vote in favor of and support these bills or tries to “water-down” or stall these bills is clearly a Traitor and “Sold Out” the United States of America!

“Congress can revoke central bank’s charter ‘at any time’” –Ron Paul

“The only accountability the Federal Reserve has is ultimately to Congress, which granted its charter and can revoke it at any time. It is Congress’s constitutional duty to protect the value of the money, and they have abdicated this responsibility for far too long. This was the issue that got me involved in politics 35 years ago. It is very encouraging to finally see the issue getting some needed exposure and traction. It is regrettable that it took a crisis of this magnitude to get a serious debate on this issue.” –Rep. Ron Paul

“Educate and inform the whole mass of the people… They are the only sure reliance for the preservation of our liberty.” –Thomas Jefferson

 
“Don’t interfere with anything in the Constitution. That must be maintained, for it is the only safeguard of our liberties.” –Abraham Lincoln

“The Constitution is the guide which I never will abandon.” –George Washington

“Complacent ignorance is the most lethal sickness of the soul.” –Plato

“If the freedom of speech is taken away then dumb and silent we may be led, like sheep to the slaughter.” –George Washington

Related Posts:

• Origins of the American Empire: Revolution, World Wars and World Order
• As the People Grow More Desperate…A Constitution in FULL Crisis
• Top official at Fed says U.S. economy will crash if central bank audited
• Entering the Greatest Depression in History