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Several times previously, the Fed's legitimacy was challenged in federal court to no avail. Each time, the the current system was upheld under which each Federal Reserve Bank was ruled a separate corporation owned by commercial banks in its region. In one case, Lewis v. United States (1982), the Ninth US Circuit Court of Appeals held that "federal reserve banks are not federal instrumentalities....but are independent, privately owned and locally controlled corporations (statutorily) empowered to conduct (their affairs) without day to day direction from the federal government." In other words, they're independent of government, can do as they please, and take full advantage as the Federal Reserve Act allows, yet Congress does nothing to deter them.
Madison, Jefferson, Jackson, Lincoln and Kennedy Disagreed
In 1691, three years before the Bank of England's founding, Massachusetts became the first colony to issue its own money backed by the full faith and credit of the government. Other colonies followed, called "scrip." It freed them from British banks to run their affairs inflation free with no taxes. For over 25 years, they needed none, yet achieved sustained, stable, prosperous growth, the kind impossible under a privately run system. More on that below.
In 1751, colony-based British merchants and financiers got King George II to ban new paper money and force colonial governments to borrow it from UK bankers. In 1764, Benjamin Franklin petitioned to stop it without success. Instead, the Bank of England got Parliament to pass a Currency Act making it illegal for the colonies to issue their own money. It turned prosperity into poverty, the root cause, Franklin believed, for the Revolutionary War.
America's Founders and later presidents railed against bankers. James Madison, called them "Money Changers" saying:
"History records that the Money Changers have used every form of abuse, intrigue, deceit and violent means possible to maintain their control over governments by controlling money and its issuance."
Thomas Jefferson said:
"I sincerely believe that banking institutions are more dangerous to our liberties than standing armies. Already they have raised up a money aristocracy that has set the government at defiance. The issuing power should be taken from the banks and restored to the people to whom it properly belongs."
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