Thread by @yassineARK

1/ We often forget how the @FederalReserve, America’s central bank and the heart of the country’s banking system, truly came to be.

In this thread, I will lay out a fascinating, often overlooked, part of history:

2/ "In order to understand the Federal Reserve, we must first understand its origins and context. We must deconstruct the puzzle."

3/ In late 17th century, England suffered a devastating defeat by France in the Battle of Beachy Head. It was this defeat that became "the catalyst for England rebuilding itself as a global power."

en.wikipedia.org/wiki/Battle_of…

4/ It wasn't obvious how England was going to fund the rebuilding. King William III lacked credit and public funds were minimal.

In comes Scottish Banker William Patterson with a proposal.

5/ Patterson proposed to "form a company to lend 1M pounds to the gov at 6 % (+ 5,000 ‘mgm fee’) with the right of note issue.” This would give the company EXCLUSIVE possession of the government's balances.

In 1694, after some slight revision, the Bank of England was created.

6/ Sure, it was named the Bank of England. But it was NOT a government entity. "It was a private bank owned by private shareholders for their private profit with a charter from the king that allowed them to print the public’s money out of thin air and lend it to the crown."

7/ Turns out The Bank of England came to be a template for modern central banks: a privately controlled central bank lending money to the government at interest.

8/ Fast forward nearly 100 years when in 1781, the U.S. came under severe financial distress. Desperate to find a way to finance the end stages of the war, Congress turned to Robert Morris, a wealthy shipping merchant.

9/ Morris was elected as Superintendent of Finance and advocated for the creation of a privately-owned central bank exactly mirroring the Bank of England. Congress, forced by war obligations, submits and charters the Bank of North America.

10/ By the end of the war, Morris turns unpopular with the public and the B.N.A's currency fails to win the people over.

B.N.A. is downgraded from a national central bank to a private commercial bank.

11/ With the end of one came the (not so different) beginning of another. A group led by Alexander Hamilton was working on the next privately-owned central bank for the U.S.

Hamilton proves successful, and The First Bank of the United States is chartered in 1791.

12/ Interestingly enough, this exactly mirrored the B.N.A in that it was a privately-owned central bank with the authority to loan money that it created out of nothing to the government. Even the SAME people, Morris and Willing, were involved.

13/ By the time the bank’s charter came due for renewal in 1811, money interests behind the bank faded. The public didn't really see a need of a central bank in time of peace. In 1811, the bank closed and the charter renewal voted down.

14/ Less than a year later, the US is once again at war with England. In 1816, President Madison signs the charter for the creation of yet another privately-owned central bank, the Second Bank of the United States.

15/ The end of the Second Bank occured during President Jackson's term, when the government announced it would stop using the bank and pay off the debt. The Second Bank of the United States’ charter expires, losing its status as a central back.

16/ For the next 77 years, the U.S. ran without a central bank but towards the end of the 19th century, was rocked by banking panics brought about by wild banking speculation and sharp contractions in credit. This led to the famous Bank Panic of 1907.

en.wikipedia.org/wiki/Panic_of_…

17/ What caused it? Well a large driver was the United Copper Company, founded by Augustus Heinze, who, along with Charles Morse, had partial control of 6 national banks, 10 state banks, 5 trust companies and 4 insurance companies.

18/ "Augustus Heinze's brother, Otto Heinze, devised a scheme to corner the market in United Copper stock. The Heinzes owned a large share of the company and Otto believed that many of these shares had been loaned out to investors hoping to short sell the stock."

19/ "But Otto Heinze overestimated how much of the company the family controlled. When he forced the borrowers to buy back stock they were able to get it from other sources."

20/ "When the market realized his corner had failed, the stock price collapsed. So shocking was the collapse, that depositors rushed to pull the money out of the banks of F. Augustus Heinze. From there panic spread, as people rushed to pull money out of banks associated."

21/ During this same time, a large part of American economy was run by a few industrial magnates: Astors in real estate; Carnegies and Schwabs in steel; Harrimans, Stanfords and Vanderbilts in railroads; Mellons and Rockefellers in oil.

22/ In consolidating their fortunes, these families gravitated towards the banking sector and in particular one man, then known as America's informal central banker, John Pierpont Morgan. @jpmorgan

23/ Morgan financed Vanderbilt’s New York Central Railroad, bought out Carnegie and created the US Steel Corporation. Morgan financed the launch of nearly every major corporation of the period, from AT&T to GE to GM to DuPont.

24/ In light of the panic of 1907, an opportunity rose for these magnates to 'rescue' the United States.

And so, in November of 1910, a group of the richest and most powerful men in America boarded a private rail car at a railroad station in Hoboken, NJ

25/ The car belonged to Senator Nelson Aldrich, the father-in-law of John D. Rockefeller, Jr. He was joined by A. Piatt Andrew, Ass. Treasury Secretary; Frank Vanderlip, Pres. of the National City BNY; Henry P. Davison, partner of J.P. Morgan, amongst others.

26/ "Their destination? Jekyll Island off the coast of Georgia, home to the prestigious Jekyll Island Club, whose members included the Morgans, Rockefellers, Warburgs, and Rothschilds."

en.wikipedia.org/wiki/Jekyll_Is…

27/ This meeting was a plan to form a central banking system owned by the banks themselves, "a system which would organize the nation’s banks into a private cartel that would have sole control over the money supply itself."

28/ But what was so incredible about all this was that it wasn't revealed until years later, when Frank Vanderlip wrote a casual admission of the meeting in the February 9, 1935, edition of The Saturday Evening Post.

29/ Below are some of the most revealing parts of Frank Vanderlip's interview, which can be found in full here: saturdayeveningpost.com/wp-content/upl…

30/ And so in late December of 1913, the Federal Reserve Act (then referred to as the Currency Bill) was signed into law by President Woodrow Wilson after passing the House and Senate... this the birth of the Federal Reserve System.

31/ Now, the vast majority of money is "not created not by a government printing press, but by the bank itself. It is created out of thin air as debt, owed back to the bank that created it at interest."

32/ With that, "...The U.S. is not a sovereign. Not anymore. Nor is any single European nation.. Bitcoin, and Bitcoin alone is sovereign. The implications of this, of course, are so far reaching as to be readily left as an exercise to the reader." - Mircea Popescu h/t @Adam_Tache