By Marilyn Barnewall
The Honorable Louis T. McFadden, Congressman from Pennsylvania, leveled charges at the Federal Reserve Board on the floor of Congress that would have made the most aggressive conspiracy theorist blush.
McFadden accused the Federal Reserve of swindling the U.S. Treasury, of conspiring with their foreign principals (central banks in other nations) and others to defraud the American government.
As if that were not enough, McFadden further told his compatriots on the House floor that the Fed had robbed the U.S. government and the people of the United States by their theft and sale of the gold reserves of the U.S.”
Not to add fuel to this fire, but a lot of Americans today question how many ounces of gold reside in Fort Knox now versus pre-Federal Reserve.
The Congressman suggested the Fed reduced America from a first-class power to a status of dependency from a rich nation to an internationally poor one.
Congressman McFadden’s comments were made while the House was debating a Bill that expanded securities the Federal Reserve could trade when conducting monetary policy.
During the days of the New Deal (depression-era economic policies, for those readers born after World War II), unemployment approached 25 percent.
Homelessness and starvation were increasing. More and more, hard-working members of the middle-class found themselves on the streets, unable to feed their children.
Like now, people then believed only the poor and the lazy were homeless. When it happened to them, they were shocked. This was not the way things were supposed to be.
On June 10, 1932, Congressman McFadden launched a twenty-five minute tirade against the Fed.
Some of his remarks: “‘Mr. Chairman, we have, in this country, one of the most corrupt institutions the world has ever known. I refer to the Federal Reserve Board and the Federal Reserve banks. The Federal Reserve Board, a government board, has cheated the government of the United States out of enough money to pay the national debt.”
McFadden continued: The depredations and the iniquities of the Federal Reserve Board and the Federal reserve banks acting together have cost this country enough money to pay the national debt several times over.
This evil institution has impoverished and ruined the people of the United States; has bankrupted itself, and has practically bankrupted our Government. It has done this through defects of the law under which it operates, through the maladministration of that law by the Federal Reserve Board, and through the corrupt practices of the moneyed vultures who control it.”
No one can accuse McFadden of holding back when expressing his feelings — or, of not following-through. On May 23, 1933 – less than a year after his 1932 tirade – Congressman McFadden brought formal charges against the Board of Governors of the Federal Reserve Bank system, the Comptroller of the Currency and the Secretary of United States Treasury. He charged them with “numerous criminal acts, including but not limited to, CONSPIRACY, FRAUD, UNLAWFUL CONVERSION, AND TREASON.”
The petition for Articles of Impeachment was referred to the House Judiciary Committee, but no action was ever taken by the Congress. It was never rejected nor acted upon. Looking at Congressional records, it appears McFadden’s charges are still pending against the Fed — I wonder if Alan Greenspan knows.
McFadden was an extremely interesting guy. He saw the Federal Reserve and the nationalization of our banks as a great threat to the freedom and the individual wealth of the American people. In 1927, he authored the McFadden Act and fought hard to get it passed by the House and the Senate.
Its purpose: To prevent interstate branch banking.
McFadden felt he could hold what he perceived as a power-hungry Federal Reserve in check. He thought he could keep them from becoming too powerful. The way he did it was to limit the banking industry’s ability to establish branch banks over state lines.
For almost 70-years, this Act prevented interstate branch banking.
The almost century old and still-pending charges of treason, fraud, and conspiracy are not the only mystery surrounding this colorful Congressman.
The McFadden Act makes it illegal for interstate branch banking to occur anywhere in the United States. It has never been repealed. Yet, we have full-fledged branch banking.
The waters are very murky, indeed, as to whether interstate branch banking legislation is legal. It may violate federal law… the McFadden Act of 1927, and the National Bank Act of 1863. I can’t say I have the greatest understanding of how federal law works, but I always thought that you could not write a new federal law that contradicts an old federal law without repealing the old law.
The legislation that allowed interstate branch banking is called The Bank Holding Company Act. It was passed in the 1970s. Bank holding companies are the banking industry’s way of incorporating so they comply with McFadden while establishing branches in other states. Prior to the time the law allowed interstate branch banking, banks used holding companies to establish separate corporations in the new markets they entered.
The Comptroller of the Currency chose to interpret the lack of any language denying bank holding companies the right to branch interstate as permission to branch interstate.
In coming to this decision, the Comptroller totally ignored the 70-year old McFadden Act. That legislation clearly defines the letter of the law and that letter does not permit interstate branch banking. To my knowledge, it is still on the books as federal law.
Congressman McFadden evidently suffered two attacks against his life, by the way.
First, someone tried to assassinate him with two revolver shots fired from ambush. He was getting out of a cab in front of a District of Columbia hotel. Both shots missed him and were buried in the structure of the cab.
Then, after eating a meal at a political banquet in the nation’s capitol, he became violently ill. His life was saved from what was subsequently announced as a poisoning by the presence of a friend in attendance at the banquet — a physician. The doctor procured a stomach pump and subjected the Congressman to “emergency treatment.”
On October 3, 1936, McFadden died of sudden heart failure. It happened after a dose of intestinal flu.
I have always believed McFadden was right about limiting the power of the Fed. I think the interstate branch-banking trend and the giant banks that result from it are dangerous.
I believe it is a bad idea to hand any industry power which, if abused and used in conjunction with government, can force a peaceful and lawful surrender of individual Constitutional freedoms.
Marilyn Barnewall, in 1978, was the first female to be named vice president in charge of a major loan and deposit portfolio at Denver’s largest bank. She started the nation’s first private bank, resigned to start her own firm and consulted for banks of all sizes in America and other countries. In June 1992, Forbes dubbed Barnewall “the dean of American private banking.” Author of several banking texts, she has written extensively for the American Banker, Bank Marketing Magazine, and was U.S. consulting editor for Private Banker International (Lafferty Publications, London/Dublin). Article originally appeared in the Grand Junction Free Press. Marilyn can be reached at [email protected].