The Creature From Jekyll Island Ch 4 by G. Edward Griffin

pbgreenpoint (68)in #money • 7 years ago (edited)

Hey guys I'm continuing the breakdown of The Creature From Jekyll Island. Chapter 4 is named Home, Sweet Loan. Links to my other breakdowns will be listed below at the end of the post. Thanks for reading and lets get to it..

Chapter 4 starts out by describing how Socialism takes root in America. It all began with a concept. The concept took root in America largely as a result of the Great Depression of the 1930's. American politicians were impressed at how radical Marxists were able to attract popular support by blaming the capitalist system for the country's woes and by promising a socialist utopia. While the extreme and violent aspects of Communism generally were rejected, the more genteel theories of socialism became popular among the educated elite. It was they who would naturally become the leaders in an American Socialist System. Someone had to "look after the masses and tell them what to do for their own good." It was desirable for the government to take care of its citizens and protect them in their economic affairs.

During the Great Depression, more than 1900 Saving & Loans Institutions (S&Ls) went belly up. President Hoover and a most willing Congress created the Federal Home Loan Bank Board to protect depositors in the future. The public was led to believe that government regulators would be more wise, prudent, and honest than private managers. Hoover was succeeded by FDR in the White House who became the epitome of the new breed. FDR would go down in history as a pioneer of Socialism in America. It was FDR who established the Federal Deposit Insurance Corporation (FDIC) and the Federal Savings & Loans Insurance Corp (FSLIC). From this point forward, neither the public nor the managers of the thrifts needed to worry about losses. Everyone would be reimbursed by the government.

At about the same time, loans on private homes became subsidized through the FHA how allowed S&Ls to make loans at rates lower than would have been allowed without the subsidy. While the Marxists were promising a chicken in every pot, the New Dealers were winning elections by pushing a house on every lot. FHA-induced easy credit began to push up the price of houses for the middle class, and that quickly offset any real advantage of the subsidy. These measures effectively removed real estate loans from the free market and placed them into the political arena, where they have remained ever since.

Behind the troubles banks and the increasingly troubled insurance agencies stands "the full faith and credit" of the Government- in effect, a promise, sure to to be honored by Congress, that all citizens will chip in through taxes or through inflation to make all depositors whole.

In the early days of the Reagan administration, government regulations were changed so the S&Ls were no longer even required to obtain a down payment on their loans. They could now obtain finance of 100% of a deal, or even MORE (103% financing). As result, office buildings and shopping centers sprang up everywhere regardless of the need. Developers, builders, managers, and appraisers made millions. In at least 22 failed S&Ls, there is evidence that the Mafia and CIA were involved.

Fraud is not necessarily against the law. In fact, most of the fraud in S&Ls was not only legal, it was encouraged by the government. The Garn-St Germain Act allowed thrifts to lend an amount of money equal to the APPRAISED value of real estate rather than the MARKET value. It wasn't long before appraisers were receiving handsome fees for appraisals that were, to say the least unrealistic. The amount by which the appraisal exceeded the market value was defined as "appraised equity" and was counted the same as capital.

In February of 1989, an agreement was reached between Alan Greenspan, Chairman of the Federal Reserve Board, and M. Danny Wall, Chairman of the Federal Home Loan Bank Board, to have $70 million of bailout funding for Lincoln Savings come directly from the Federal Reserve. This was a MAJOR break in precedent. Historically, the Fed served to create money only for the government or for banks. If it were the will of the people to bail out a savings institution, then it is up to Congress to approve the funding. If Congress does not have the money or cannot borrow it from the public, then the Fed can create it (out of nothing) and give it to the government. But in this instance, the Fed was usurping the role of Congress and making political decisions entirely on it own. There is NO basis in the Federal Reserve Act for this action. Yet, Congress remains silent, apparently out of collective guilt for its own paralysis.

In the mid 1980's, Drexel had become the most profitable investment bank in the country through the use of high yield bonds that grew at the expense of bank debt. They had over $180 billion that was no longer being channeled via Wall Street. Here was money coming from people's savings instead of being created out of nothing by the banks. In other words, here was growth built upon real investment, not inflation. Certain people were not happy about this.

The 1st line of attack on this new market of High-Yield Bonds was to call them "Junk." The financial media picked it up and many investors were frightened away. The next step was for compliant politicians to pass a law requiring S&Ls to get rid of their "Junk," supposedly to protect the public even though these bonds were performing satisfactorily and were a source of much needed revenue. Nevertheless, The Financial Institutions Reform and Recovery Act was passed in 1989. This caused the price of "Junk" bonds to plummet. So it was the government itself that crashed the junk bond market.

So the real problem within the S&Ls industry is governmental regulation which has insulated it from the free market and encouraged it to embark upon unsound business practices. If you're going to wreck a business the size of the US Thrift Industry, you will need the power of a national political authority, the kind of power possessed only by regulators and Congress. S&Ls Associations, banks, and other federally regulated institutions are heavy contributors to the election campaigns of those who write the regulatory laws. Congress by following the socialist path and presuming to protect or benefit their constituency, have suspended and violated natural laws that drive a free-market economy. The S&Ls industry is really a cartel within a cartel. It could not function without Congress pushing in unlimited amounts of money into it, and Congress could not do that without the banking cartel called the Federal Reserve standing by a the "lender of last resort" to create money out of nothing for Congress to borrow.

The damage done by the banking cartel is made possible by the fact that money can be created out of nothing. It also destroys our purchasing power through the hidden tax called inflation. American citizens must become far more politically educated. After 60 years of subsidizing and regulating the housing industry, how many young people today can afford a home?

Well that's all for now. Hope you enjoyed. Feel free to resteem to share and make people more aware of what is going on with central bankers and big government. If you enjoyed what you read, please upvote and feel free to comment with any thoughts.

Take care and stay safe out there,
Pete

#politics #news #history #freedom