Gentlemen, I have had men watching you for a long time and I am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter, I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves.

– Andrew Jackson

The French famously say that the more things change, the more they stay the same. While the particular form that the latest banking fraud has taken is different – there were no option ARMs, mortgage-backed security tranches or electronic mortgage registration systems in the 1830s – the United States found itself similarly afflicted by the financial predations of a private central bank.

Then, as now, the bankers were inflating the money supply, speculating with the bank-created funds, paying themselves massive bonuses out of the profits whenever they won and sticking the taxpayers with the losses whenever they lost. And, just like Henry Paulson during the 2008 financial crisis, they falsely claimed that what was bad for them was bad for the country and that permitting them to experience the consequences of their failures would have a terrible effect on the American people.

In 1833, Andrew Jackson called their bluff, refused to renew the charter of the Second Bank of the United States – the first had failed in 1811 – and withdrew the federal government’s money from it. Forced to operate as an ordinary bank without the benefit of a legally enforced federal monopoly, the financial geniuses who had asserted that the wealth of the country completely depended upon them went bankrupt in five years. The American people, on the other hand, went on to become the wealthiest and most powerful nation in the world despite the absence of a central bank and a bloody civil war less than 30 years later.

The Great Foreclosure Fraud is not, as many optimists are attempting to downplay it, a matter of some shady mortgage holders attempting to use a minor technicality to get out of paying their mortgages. Nor is it a matter of poor filing systems or misplaced paperwork on the part of the banks. It is actually the systematic unraveling of a massive fraud cubed, in which the banks have been caught breaking both state and federal law in a large-scale, but futile attempt to cover up their collective insolvency as well as their previous violations of state and federal law. And worse, they have done so with the full knowledge and complicity of the Federal Reserve, Congress and the financial regulatory bodies, as is correctly implied by this bitterly hilarious Hitler parody. (Editor’s note: The linked video contains language that may be offensive to some readers.)

The present economic situation is far more dire than is being reported by the media, the official declaration by the NBER’s Business Cycle Dating Committee that the recession ended in June 2009 notwithstanding. Consider the way in which commercial bank credit has plunged an unprecedented 13.6 percent since its peak in December 2008; the previous two-year record was the 0.8 percent decline during 1974 and 1975. Since bank credit has historically grown by 8.4 percent each year, this means that the credit supply of the U.S. economy is presently $2.1 trillion below where it would have been if the economy had continued to grow normally in 2009 and 2010.

The recent confirmation that the entire U.S. financial system is presently resting upon a foundation of fraudulent securities backed by defaulting mortgages to which no one holds a valid title is unlikely to materially improve this situation. The problem is that for the last 20 years, under political pressure from the banks, both political parties have colluded in eviscerating the legal system of property rights that economist Hernando de Soto has demonstrated is required for a capitalist system to generate wealth. This short-sighted financial rapine has not only ruined the economy, but may have even managed to permanently damage the wealth-producing infrastructure of American society.

So it will not be enough to simply declare a moratorium on foreclosures, reassign several million property titles to the banks and attempt to carry on as before. To do so would be to make the same mistake as was made in 2008, when the insolvent banks were bailed out rather than permitted to go bankrupt and thus laid the groundwork for the present debacle. If the American economy is to survive, then America’s politicians must stop sacrificing the financial interests of the entire nation for the benefit of a small number of financial institutions.

Andrew Jackson made the correct decision 177 years ago when he risked the short term pain of a financial recession to surgically excise a morbidly cancerous banking system from the nation. Today, Ben Bernanke, Barack Obama and the incoming Republican majorities in the House and Senate are facing the same difficult choice. They can save the banking system, or they can save the nation … but they can only choose one.

Note: Read our discussion guidelines before commenting.