Zeitgeist - Part III: Don't Mind the Men Behind the Curtain

Re: The Federal Reserve

Zeitgeist provides a condemnation of central banks in general, as of the Federal Reserve in particular. The Federal Reserve is portrayed as the product of a broad conspiracy, and that it is run for massive profits by secret owners. It is a mixture of fact, fiction, and insinuation.

Web Skeptic has addressed this part of the film point-by-point because there does not seem to be any other such comprehensive analysis of this section of the film on the web.

Opening quotes


“There is something behind the throne greater than the king himself” -Sir William Pitt, House of Lords, 1770-

Confirmed .. referring to a royal scandal at the time [1],[3]

“The World is governed by very different personages from what is imagined by those who are not behind the scenes” -Benjamin Disraeli, English Statesman, 1844-

Confirmed .. from a book of fiction by Disraeli [1]

“The real truth of the matter is that a financial element in the large centers has owned the government since the days of Andrew Jackson” -Franklin D. Roosevelt, US President, 1933-

Confirmed This quotes is from a letter from FDR to Col. Edward Mandell House in 1933. It is not clear what the context was. [1],[2],[4]

Cause of the American Revolution

Zeitgeist: …1775…

1775. The American revolutionary war began as the American colonies sought to the detach from England and its oppressive monarchy. Though many reasons are sided for the revolution, one in particular sticks out as the prime cause that King George III of England outlawed the interest-free independent currency the colonies were producing and using for themselves. In turn forcing them to borrow money from the Central Bank of England, at interest, he immediately put the colonies in the debt.

Mostly False

  • True - … that outlawing local currency with the Currency Act of 1764 was one of many acts that stirred up the colonists
  • False - …that it was probably the primary cause. Most historians would cite other reasons as more significant like taxation and force monopolistic trade with England
  • False - … that the colonists were forced to borrow money from the Bank of England. "In 1775…few colonists had any dealings with (the Bank of England)

Zeitgeist: Ben Franklin quote

And as Benjamin Franklin later wrote: "The refusal of King George to allow the colonies to operate an honest money system, which freed the ordinary man from clutches of the money manipulators was probably the prime cause of the revolution" -Benjamin Franklin, Founding Father

Underdetermined Cannot confirm from a reliable source.

Overview of a central bank

Zeitgeist: "Central bank" definition

“So what is a central bank? A central bank is an institution that produces the currency of an entire nation. Based on historical precedent, two specific powers are inherent in central banking practice: the control of interest rates and the control of the money supply, or inflation.

Mostly False

  • Regarding production of currency - Prior to 1913, currency continued to be produced by numerous state and national banks, even when the First and Second U.S. Banks were in operation. After 1913, the Federal Reserve produced most curreny though the Treasury continued to produce silver certificates. Even today, currency in the forms of coins continues to be issued by the Treasury. It is also important to note that currency and money are different. Currency generally refers to paper money and coins.
  • Regarding control of interest rates - Prior to 1913, there was little attempt to control interest rates by the First and Second U.S. Banks. Interest rates rose and fell based on demands for loans. When the Federal Reserve was created, the control of interest rates was not a goal; it developed as a policy after some years of trial-and-error and much debate. Although money supply and inflation are related, they are not the same phenomenon. Interest rates and inflation is not solely in the hands of the governmenet. For example, the U.S. Government has little influence over the price of commodities which are traded globally and can have a significant impact on inflation. And, although the Federal Reserve can influence short term interest rates, long term interest rates are often influenced by bond investors and during periods of financial distress, they demand higher interest rates to compensate for elevated risk levels.

Zeitgeist: Central bank loans all new money at interest

The central bank does not simply supply a Government’s economy with money, it LOANS it to them AT INTEREST.

Falseas it relates to the Federal Reserve. The Federal Reserve does not make any direct loans to the government. When the Federal Reserve wants to increase the money supply, it will buy previously issued T-Bills on the open market. This action does not create any new debt. In fact, if one considers the Federal Reserve as an arm of the government, then the Fed buying T-Bills actually reduces the amount of debt held by the public. The Federal Reserve also holds the currency of other countries; buying and selling of those foreign currencies is another tool to increase or decrease the money supply without debt. Another action the Federal Reserve can take is to reduce the amount of reserve banks are required to hold, thus increasing the money supply without requiring the use of debt.

Trueas it relates to some central banks in history and elsewhere in the world. But where fiat money is concerned, a central bank making direct loans to the government is usually a sure sign of a government in trouble. Virtually all cases of hyperinflation in modern history involve the central bank (by order of government leaders) simply printing money and making direct loans to the the government for expenses. The fact that the Federal Reserve charges interest is actually positive. All assets have a cost and the cost of money is the interest rate. Further, it is in taxpayer's best interest to charge an appropriate rate to private banks for borrowing what is essentially a public asset. For example, it would not make economic sense to lend money to a bank for free (no interest) that is publicy traded on the New York Stock Exchange (whose shareholders may or may not be American) so they can lend those same funds to their customers at a higher rate. This is the core concept of banking - borrow money at a low cost and lend it at a higher cost.

Zeitgeist: regulating the value of currency

Then through the use of increasing and decreasing the supply of money, the central bank regulates the VALUE of the currency being issued.

Mostly True as it related to the Federal reserve today. The Federal Reserve, as part of its mission, actively tries to control inflation.

Partly True as it relates to central banks before 1900. Back then, there was more of a laissez faire approach to the money supply that allowed for inflation in boom periods and deflation in bust periods.

Completely Misunderstood as increasing the money supply is important in a growing economy. Consider a simple economy consisting of only two people, each with one dollar. If a baby is born, there are now three people but only two dollars between them, hence, they would experience a decline in their living standards. Since the United States experiences a growing population base and a growing economy, a growing money supply is actually healthy so long as the money supply doesn't grow too fast.

Zeitgeist: system can only produce debt

It is critical to understand that the entire structure of this system can only produce on thing in the long run: DEBT.

Somewhat true It is true that a central bank will try to foster a vibrant economy that will provide plenty of capital available for borrowing. However, the decision to borrow is left up to the legislature, business, and individuals.

Zeitgeist: end result is SLAVERY

The end result of this system is SLAVERY, for it is impossible for the Government, and thus the public, to ever come out of the self-generating debt.


  • This does not meet the definition of "slavery" where one person is owned by another person. (Perhaps this can be dismissed as a bit of hyperbole)
  • As it relates to the U.S: It is definitely possible for the Government to get out of debt. Since most T-bills mature in less than 10 years, the government could get out of debt by running a balanced budget for 10 years straight.

Caveat: Since the Fed uses T-Bills as collateral for U.S. currency, and many investors hold T-Bills rather than non-interest earning deposits, there would be the question of what happens if there are no T-bills in circulation. In addition, how would non-governement fixed income investments be valued given that many are priced compared to the "yield curve?" One can only speculate (since there have always been T-bills available). The question did come up during the short-lived Clinton deficits. One answer called for the Treasury to produce T-Bills anyway as these were the bellweather for all other investments. But this would be a choice of the Treasury, not a requirement of the Federal Reserve.

Zeitgeist: Jefferson Quote

"I believe that banking institutions are more dangerous than standing armies…if the American people ever allow private banks to control the issue of currency…the banks and corporations that will grow up around them will deprive the people of their property until their children wake up homeless on the continent that their fathers conquered.” Thomas Jefferson, 1743-1826

Mostly False This is a frequently referenced quote by similar fringe sites but is most likely a concoction. [5]A search of Thomas Jefferson digital archive yields only pieces.[6]

The first portion can be attributed to a letter to John Taylor in 1816 that says " I sincerely believe… that banking establishments are more dangerous than standing armies"

The rest of the quote cannot be attributed to any of Jefferson's writing. In fact, this doesn't really match the writing style of Jeffersion.

Zeitgeist: Josiah Stamp Quote

If you want to remain slaves of the bankers and pay for the costs of your own slavery, let them continue to create money and control the nation’s credit” -Sir Josiah Stamp (1880-1941)

Underdetermined This quote can be found on many web sites so it may be reasonable to accept at face value. In researching this quote, the original source could not be found. Update Recently the author of a book that uses this quote contacted Webskeptic to see if we had an original source as they could not find the source either.

Origins of the Federal Reserve

Zeitgeist: Dominate families in banking

By the early 20th century, the dominate families in the banking and business world were the Rockefellers, the Morgans, the Warburgs, and the Rothschilds. In the early 1900s, they fought to push legislation to create yet another central bank…

Mostly True

But to be picky..

  • The Rothschilds empire was already in substantial decline by the 20th century.
  • JP Morgan's empire-building acumen did not manifest itself in other family members as it seem to do with the Rothschilds and Warburgs.

Zeitgeist: Panic of 1907

Since they knew the Government and public were very wary of such an institution, they needed to create an incident to affect public opinion. So J.P. Morgan, publicly considered a financial luminary at that time, exploited his mass influence by publishing rumors that a prominent bank in New York was financially insolvent, or bankrupt. Morgan knew this would cause mass hysteria, which would affect other banks as well. And it did. The public, in fear of losing its deposits, immediately began mass withdrawals. Consequently, the banks were forced to call in their loans, causing the recipients to sell their property, and thus a spiral of bankruptcies, repossessions and turmoil emerged. Putting the pieces together a few years later, Fredrick Allan of Life Magazine wrote, ‘The Morgan interests took advantage…to precipitate the panic [of 1907] guiding it shrewdly as it progressed.’

Highly speculative and misleading The above account does not match the historical record.

The Panic of 1907 started with the early stages of collapse of the Knickerbocker Trust Company, the third largest bank of New York. The Knickerbocker had been engaging in highly speculative investments in an unsuccessful attempt to corner the market on copper. The dire situation of the bank became public which led to a flood of depositers asking for their money. The interdependency of banks led to runs on other banks and eventually triggerred a massive drop in the stock market due to margin calls.

Did J. P. Morgan start rumors on the Knickerbocker? There doesn't seem to be proof either way. In any case, these 'rumors' would have been true.

J. P. Morgan did play an important roll in dealing with the panic which could be interpretted as either best or worst intentions. As one of the richest men in the world, Morgan was in a position to greatly influence the situation. He called a meeting of top bank execs almost immediately to discuss how to stop the panic. The strategy was to decide which banks worth saving and which were weak and should be allowed to fail. (Morgan was a believer in capitalistic darwinism).

The net result was some trusts, including the Knickerbocker, failed. Morgan, and later Rockefeller, made very public investments in other trusts. By 1908, the economy recovered. It is generally accepted that this alleviated the panic and it did not result in the depression similar to the one that followed the panic of 1893.

The Panic of 1907 did indeed elevate interest in creating a new central bank that could be the "bankers bank of last resort". That Morgan was instrumental in the dealing with it bolstered claims on both sides of the debate on whether it should be a publicly owned or prviately owned central bank. The 'private' advocates held it up as how the bankers themselves had a self-interest in keeping the industry strong. The 'public' advocates feared having such immense power in the hands of a few.

Zeitgeist: Following the panic…

…the panic of 1907 led to a Congressional investigation headed by Sen. Nelson Aldrich, who had intimate ties to the banking cartels and later became part of the Rockefeller family through marriage. The Commission, led by Aldrich, recommended that a central bank should be implemented so that a panic like 1907 could never happen again.

True but potentially misleading Nelson Aldrich did indeed spearhead two congressional commissions; one to study the American monetary system, the other was to study the central banks of Europe.

What is not mentioned was that Nelson Aldrich was publicly against a central bank prior to the commission studies. After reviewing other banking systems, it concluded the U.S. needed a central bank.

Critics claimed Aldrich's ties to powerful banking interests may have influenced his commisson that he headed and came up with the recommendation of implementing a central bank. This is probably a fair criticism, as it would be of any politician with influential supporters.

Zeitgeist: …the international bankers plan

This was the spark the international bankers needed to initiate their plan.

Speculation What "international bankers" plan? Portraying the Federal Reserve as a puppet of international bankers is a common conspiracy theme. However, when you examine the historical record, the men behind the legislation were all Americans.

Zeitgeist: Meeting at Jekyll Island

In 1910, a secret meeting was held at a J.P. Morgan estate on Jekyll Island off the coast of Georgia.


Zeitgeist:… where the Federal Reserve Act was written.

It was there that the central bank bill called the Federal Reserve Act was written. This legislation was written by bankers, not lawmakers.

False What came out was some goals and resolution towards a central bank and eventual was the foundation for the "Aldrich Plan". But the Aldrich Plan, which called for a totally private central bank was hotly debated and received little support when it was voted on in congress.

What was finally passed in 1913 was a heavily compromised bill that called for branches run by member banks, overseen by a government body called (at that time) the Board of Directors.

Zeitgeist:…all very secret

This meeting was so secretive, so concealed from Government and public knowledge that the ten or so figures that attended disguised their names when enroute to the Island.

True The men went to great lengths to maintain the secrecy of the meeting. They had probably correctly assessed that, if the purpose was known, it would have created great suspician and concern.

Zeitgeist:…bill pushed by Nelson Aldrich

After this bill was constructed, it was then handed over to their political front man, Sen. Nelson Aldrich, to be pushed through Congress.

Misleading Not mentioned is that congress voted down the original Aldrich Plan due it it's lack of government oversight of the central bank

Zeitgeist:… 1913…

And in 1913, with heavy political sponsorship by the bankers, Woodrow Wilson became President, having already agreed to sign the Federal Reserve Act in exchange for campaign support.

Mostly False Wilson and the Democratically controlled congress campaigned against the 100% private central bank bill as outlined in the Aldrich Plan. Wilson indicated he would only sign a bill that included government oversight.

Zeitgeist:…two days before Christmas…

And two days before Christmas, when most of Congress was at home with their families, the Federal Reserve Act was voted in and Wilson in turn made it law.

Mostly False

The Federal Reserve Act (called the Currency Bill at the time) was past with most of congress present and supporting the bill. The House passed the bill 298-60 on Dec. 22nd. The Senate passed it the next day on Dec 23rd by a vote of 43-25. Of the absent senators, 23 recorded their intented vote in the congressional record. Of those 11 indicated a 'yea' vote.

There is no question that this was supported by the majority of congress despite this oft-repeated untruth.

Zeitgeist: The infamous Wilson quote

Years later, Woodrow Wilson wrote, in regret, ‘[Our] great industrial nation is controlled by its system of credit. Our system of credit is privately concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men…who necessarily, by very reason of their limitations, chill and check and destroy genuine economic freedom. We have come to be one of the worst ruled, one of the most completely controlled and dominated Governments in the civilized world — no government by free opinion, no longer a Government by conviction and the vote of the majority, but a Government by the opinion and the duress of small groups of dominant men.’”

False This is a contrived quote from Wilson's 1910 campaign speeches, made years before the passing of the Federal Reserve Act. (Usually when it appears in conspiracy prefixed with "I am a most unhappy man…")

In fact, Wilson was campaigning against the current conditions where credit was controlled by a few. He felt the Federal Reserve System would reduce the stranglehold by the concentration of wealth in just a few hands.

Zeitgeist: McFadden quote

Congressman Louis McFadden also expressed the truth after the passage of the bill:“A world banking system was being set up here… a superstate controlled by international bankers.. acting together to enslave the world for their own pleasure. The FED has usurped the government.”

True The film implies that McFadden made this quote right after passage. In reality, this quote is part of a speech that McFadden made on the floor of congress in 1932 [http://www.geocities.com/CapitolHill/Senate/3616/flaherty10.html ]. He was actually a support of the Federal Reserve for most of his political career.


Now, the public was told that the Federal Reserve System was economic stabilizer and inflation and economic crises were thing of the past. Well, as history has shown, nothing was further from the truth. The fact is, the international bankers now had a streamline machine to expand their personal ambitions. For example, from 1914 to 1919 the Fed increased the money supply by nearly 100% resulting in extensive loans to small banks and the public. Then, in 1920 the Fed called in mass percentages of the outstanding money supply. Thus resulting in the supporting banks having to call in huge numbers of loans and just like 1907, bank runs, bankruptcy and collapse occurred. Over 5,400 competitive banks outside of the Federal Reserve System collapsed further consolidating the monopoly of the small group of international bankers.

Mostly True In these early years of the Federal Reserve, their power and responsibility had not been fully realized and developed. Back then, the Federal Reserve saw as it's role was primarily to increase the money supply when it was needed, and contract it when it wasn't. This may seem naive by todays standards but was standard economic thinking back then.

In addition, the branches had considerable more autonomy and power before 1935. Though the FRS was founded with a Board of Directors, the branches generally resented their oversight. As a result, they did not act in a coordinated fashion. Worse, these large-bank dominated branches showed a surprising indifference to the failure of small banks.

Quite frankly the Fed was not meeting the goals of the original vision. This set the stage for a major overhaul and shifting of power within the Fed in 1935.

Zeitgeist:Charles Lindberg quote

Privy to this crime, Congressman Charles Lindbergh stepped up and said in 1921, “Under the Federal Reserve Act, panics are scientifically created. The present panic is the first scientific one, worked out as we figure a mathematical equation.”

The quoted text is Confirmed . It comes from chapter 11 of his book "Economic Pinch" published in 1923. [7]

Zeitgeist:stock market bubble and margin calls

From 1921 to 1929 the Fed again increased the money supply resulting once again in extensive loans to the public and banks. There was also a fairly new type of loan called the margin loan in the stock market. Very simply, the margin loan allowed an investor to put down only 10% of the stock's price with the other 90% being loaned from the broker. In other words, a person could own a $1000 worth of stock, with only a $100 down. This method was very popular in the roaring 1920's as everyone seemed to be making money in the market. However, there was a catch to this loan. It could be called in at any time and had to be paid within 24 hours. This is termed "a margin call", and a typical result of a margin call was the selling of the stock purchased with the loan.


  • True - That Fed increased the base money supply
  • True - that increasing the base money supply tends to encourage more borrowing
  • True - that margin loans were used heavily in the stock market (and this is a fairly accurate description)
  • False - Margin loans cannot be "called in" at any time, they are "called in" when the value of the underlying securities and/or the entire account falls below a specified level.
  • False - Bubbles are a common feature of human investment behaviour and are not limited to the United States. There have been many bubbles such as the Tulip Bulp Mania, Mississipi Scheme and South Sea bubble to name a few.

Zeitgeist:stock market bubble and margin calls

So, a few months before October in 1929, J.D.Rockefeller, Bernard Baruch and other insiders quietly exited the market. And on October 24th, 1929 the New York financiers who furnished the margin loans started calling them in, in mass. This sparked an instantaneous massive sell off in the market for everyone who had to cover the margin loans. It then triggered a mass bank runs for the same reason, in turn collapsing over 16,000 banks enabling the conspiring international bankers to not only buy up rival banks at the discount but to also buy up whole corporations at pennies on the dollar. It was the greatest robbery in American history. But that didn't stop there.

Questionable The allegations that the crash was engineered by Wall Street bankers is dubious at best. On October 24, 1929, the market was already in decline. Several Wall Street bankers (including Morgan's bank) made huge and public investments in the market to stem the tide. They lost huge amounts of money following the crash in the next week. The crash was a disaster for anyone that borrowed or loaned money but especially for banks who made loans for stock purchases on margin. Margin loans probably played a role, but at only 5% of the total market value, the market correction cannot be completely blamed on margin calls. Market corrections can also be blamed on market over valuation, a slowing economy or other economic stress.

Zeitgeist:contracting of the money supply?

But that didn't stop there. Rather then expanding the money supply which were recovered from this economic collapse the Fed actually contracted it, fuelling one of the largest depressions in history.

False Actually the Federal Reserve did increase the base money supply (M0) at the onset of the Great Depression. In economic hindsight, it was far too little for what was needed.

But clearly the historical record shows the money supply (M) severely contracted during this period. It may see like a contraction but it is true.

The reason is that M0 is only part of the money supply; the rest is made up of bank deposits and loans. The cascading loan defaults caused the aggregate money supply to contracte severely.

Why didn't the Fed increase the money supply further? This was still in a period when the branches acted relatively autonomously and bickered over what action was needed. There was a lot of disagreement as to whether more money was needed, or the economy would just recover on its own and the new money would just be inflationary.

(Ref: [http://economistsview.typepad.com/economistsview/2007/03/monetary_policy.html] )

Zeitgeist:Outraged McFadden

Once again outraged, Congressman Louis McFadden, a long time opponent of the banking cartels began bringing impeachment proceedings against the Federal Reserve Board. Saying of the crash and depression: “It was a carefully contrived occurrence, international bankers sought to bring about a condition of despair, so that they might emerge the rulers of us all.” -Louis McFadden

Underdetermined This particular quote is oft-repeated on many sites but a precise origin could not be determined

Zeitgeist:McFadden assassinated?

Not surprisingly, and after two previous assassination attempts, McFadden was poisoned at a banquet before he could push for the impeachment.

Mostly False

  • True - … that McFadden had one firmly documented assassination attempt when someone shot at him as he as leaving a cab
  • False-… that he died following after contracting of food poisoning at a public banquet (he survived)
  • False -… that he was assassinated. McFadden died of heart failure while under doctors care for intestinal flu.
  • False -… regarding "before he could push for impeachment". In 1932, McFadden introduced a motion for impeachment against Hoover which was voted down 361 to 8. In 1933, he introduced articles for impeachment against Secretary of the Treasury, the Federal Reserve Board of Directors, the officers and directors of its twelve regional banks, as well as some other officials. However, McFadden lost his re-election in 1934 and it never reached the floor.

Zeitgeist:Confiscating gold

Now, …the Federal Reserve bankers decided that the gold standard should be removed. In order to do this, they needed to acquire the remaining gold in the system. So, under the pretense of "helping to end the depression", came the 1933 gold seizure. Under the threat of imprisonment for 10 years everyone in America was required to turn in all gold bullion to the Treasury, essentially robbing the public of what little wealth they had left. And at the end of 1933 the gold standard was abolished.

Mostly False

  • The Fed did not have the power to remove the gold standard. That would require an act of congress.
  • Though confiscated, citizens were paid for their gold. They were not robbed.
  • Not all gold was confiscated. There were some exclusions like rare gold coins.
  • The gold standard was not abolished until 1972.

What is true is that the gold standard was proving a constraint on the government to produce more currency to deal with the great depression. Significant amounts of gold was leaving the country as other countries were demanding gold in trade payments. Some Federal Reserve branches had maxed out on the currency they could issue based on the gold they held.

FDR and congress decided to avert the crisis by confiscating gold so more currency could be issued. Over time, the amount of gold backing the U.S dollar was reduced until the standard was eventually abandon as with virtually every other industrialized country in the 20th century.

Zeitgeist:Gold certificates and legal tender

If you look at a dollar bill from before 1933 it says it is redeemable in gold. You look at the dollar bill today, it says it is legal tender which means it is backed by absolutely nothing. It is worthless paper. The only thing that gives our money value is how much of it is in circulation. Therefore, the power to regulate the money supply is also the power to regulate its value which is also the power to bring entire economies and societies to its knees.

Mostly False

  • Re: "a dollar bill from before 1933 it says it is redeemable in gold" - False - Most bills before 1933 were not redeemable in gold. Only gold certificates were redeemable in gold. Silver certificates were redeemable only in silver. Then there was the bills that said "payable on demand" or "redeemable in lawful money" without saying exactly what that meant.
  • Re: "the dollar bill today… is backed by absolutely nothing" - False - Though our money today is considered fiat money, all currency has to be collateralized i.e. backed by something of value. That something-of-value is mostly T-Bills the Fed purchased on the open market. (A small amount $11B is still backed by gold)
  • Re: "the dollar bill today… is worthless paper" - False If it was not valued, you could not use it to exchange it for goods and services.
  • Re: "The only thing that gives our money value is how much of it is in circulation" - False There are many other factors that give it value, not the least of which is the government accepts only dollars to pay taxes
  • Re: "the power to regulate the money supply is also … to bring entire economies and societies to its knees." - True - Being able to regulate the money supply is an awesome responsibility. Many societies have indeed been brought to their knees due to mismanagement or abuse.

Zeitgeist:A private corporation?

It's important to clearly understand, the Federal Reserve is a private corporation. It is about as "federal" as Federal Express.

Mostly False The Federal Reserve System is clearly owned and overseen by the government.

But, at the branch level, there is a sharing of control with the member banks. The branches are not easily classified and this deserves further explanation as well as a review of the entire system.

The Federal Reserve System is a congressionally-chartered agency like the USPS and NASA. It is organized with a 100% government agency at the top (the Board of Governors), and branches beneath them that could be considered highly regulated corporations. (Federal Reserve System structure)

The Board of Governors are all appointed for 14-year terms by the president and confirmed by congress. It operates per it's charter and laws set by congress. it is overseen by congress. There is no structure or mechanism for private ownership at this level; it is a government agency. Board members are forbidden by law to have any economic interest in a private bank. (Ref: Title 12 chapter 3 of the U.S. Legal Code). The Board determines monetary policy and provides high level oversight of the branches.

The 12 branches, however, are organized to involve member banks in the day-to-day operation. Member banks are required to buy shares in their branch. Each bank has one vote and only in their branch. The shares get a standard 6% dividend. They can vote for 6 of their 9 board members. All 'profit' from the Federal Reserve branches are turned over to the Treasury at the end of the year. The branches can be considered private 'owned' but not in the classic sense. Shares never change in value, have no relationship to the worth of the bank, and cannot be sold to the open market. The ability to vote for most of their directors (of which are usually almost approved by the Board of Governors) gives the member banks considerable control of the day-to-day operations. Another telling sign is the Board of Governors are paid as Federal employees while the branches use their own payroll system. In the court ruling "Lewis vs US", it was determined that the branches can be considered 'private' for the purposes of tort law (i.e. they can be sued) relative to the day to day operations, but probably not where they are performing official government functions.

Zeitgeist:No regulation?

It makes its own policies and is under virtually no regulation by the US Government.

Mostly False The Federal Reserve System is overseen by congress. It is regularly audited and reports to congress on a regular basis.

The conduct of monetary policy by the FRS was indeed intended to be distanced from political influence. However, it is not immune from it. With every appointee, the president and congress exert influence. And in the regular congressional hearings, congress lobbies for their wants and the Fed usually tries to accommadate to some degree. And if the Fed doesn't cooperate, congress can just pass a law or resolution forcing compliance.

Zeitgeist:Loans currency to government?

It is a private bank that loans all the currency AT INTEREST to the Government, completely consistent with the fraudulent central banking system that the country sought to escape from when it declared independence during the American Revolutionary War!”


  • The FRS is not a private bank (as discussed earlier)
  • No new loans are created when new currency is issued
  • The FRS does not make loans directly to the government

What is true that when the FRS issues new money, it will buy previously issued T-Bills on the open market. The FRS will then get the interest rather than the previous owner. However, most of the interest is returned to the Treasury as the law requires the FRS to turn over income after expenses at the end of the year.

This actually saves the Treasury and the tax payer money as no other owners of T-Bills will be returning any interest they earned.

Zeitgeist:FRS unconstitutional

Now, going back to 1913 the Federal Reserve Act was not the only unconstitutional bill pushed through Congress. (…followed by an intro to the 16th amendment)

False There is nothing in the constitution that forbids the Federal Reserve or a central bank.

4. Roosevelt, Franklin D., and Elliott Roosevelt. F.D.R., His Personal Letters. New York: Duell, Sloan, and Pearce, 1947

External Links

Wikipedia: Zeitgeist the Movie

BLOG entry on Zeitgeist

Panic of 1907

History of the Federal Reserve (Wikipedia)

New Freedom (Woodrow Wilson)

Executive Order 6102

Analysis of Louis McFaddens famous speech

Modern History Project on Louis McFaddens speech


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