Ron Paul:
......the Federal Reserve, our central bank, fosters runaway debt by increasing the money supply — making each dollar in your pocket worth less. The Fed is a private bank run by unelected officials who are not required to be open or accountable to “we the people.”
Article 1, Section 8 of the Constitution gives Congress the power to:
Section 8. The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;
To borrow Money on the credit of the United States;
To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes;
To establish an uniform Rule of Naturalization, and uniform Laws on the subject of Bankruptcies throughout the United States;
To coin Money, regulate the Value thereof*, and of foreign Coin, and fix the Standard of Weights and Measures;
To provide for the Punishment of counterfeiting the Securities and current Coin of the United States;
....To make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers, and all other Powers vested by this Constitution in the Government of the United States, or in any Department or Officer thereof.
* In 1791 the Treasury began issuing banknotes. In the late 1800's the Supreme Court ruled that the United States could make paper money legal tender. "The power [to emit paper money], as far as it will be necessary or safe, is involved in that of borrowing." ( Nathaniel Gorham (May 27, 1738 – June 11, 1796), eighth President of the United States in Congress assembled, under the Articles of Confederation). In other words, the power to emit paper money (e.g. bank notes) has been derived from the Necessary-and-proper clause in combination with the power to borrow money.
In 1791, the original Bank of the United States, sometimes referred to as "The First Bank of the United States", was proposed and brought into being under the aegis of the first Secretary of the Treasury Alexander Hamilton. The First Bank of the United States was a bank chartered by Congress on February 25, 1791. The charter was for 20 years. The Bank was created to handle the financial needs and requirements of the central government of the newly formed United States, which had previously been thirteen individual colonies with their own banks, currencies, and financial institutions and policies.
Along with establishing a mint and an excise tax, the purpose of Hamilton's proposed bank was to:
Establish financial order, clarity and precedence in and of the newly formed United States.
Establish credit—both in country and overseas—for the new nation.
To resolve the issue of the fiat currency, issued by the Continental Congress immediately prior to and during the United States Revolutionary War—the "Continental".
A student of both the French finance minister Jacques Necker and his British counterpart Chancellor of the Exchequer Robert Walpole (in addition to his own extensive reading), Hamilton devised a bank for the whole of the country, not for just sections or states.
According to the plan put before the first session of the First Congress, Hamilton proposed establishing the initial funding for the Bank of the United States through the sale of $10 million in stock of which the United States government would purchase the first $2 million in shares. Hamilton, foreseeing the objection that this could not be done since the U.S. government didn't have $2 million, proposed that the government make the stock purchase using money loaned to it by the Bank; the loan to be paid back in ten equal annual installments.
The remaining $8 million of stock would be available to the public, both in the United States and overseas. The chief requirement of these non-government purchases was that one-quarter of the purchase price had to be paid in gold or silver; the remaining balance could be paid in bonds, acceptable script, etc.
By insisting on these conditions the Bank of the United States might technically possess $500 thousand in "real" money that it could, and would, make loans up to its capitalized limit of $10 million. However, unlike the Bank of England from where Hamilton drew much of his inspiration, the primary function of the Bank would be commercial and private interests. The business it would be involved in on behalf of the federal government—a depository for collected taxes, making short term loans to the government to cover real or potential temporary income gaps, serving as a holding site for both incoming and outgoing monies—was considered highly important but still secondary in nature.
There were other, nonnegotiable conditions for the establishment of the Bank of the United States. Among these were:
That the Bank was to be a private company.
That the Bank would have a twenty year charter running from 1791 to 1811, after which time it would be up to the Congress to renew or deny renewal of the bank and its charter; however, during that time no other federal bank would be authorized; states, for their part, would be free to charter however many intrastate banks they wished.
That the Bank, to avoid any appearance of impropriety, would:
be forbidden to buy government bonds.
have a mandatory rotation of directors.
neither issue notes nor incur debts beyond its actual capitalization.
The Second Bank of the United States was a bank chartered in 1816, five years after the expiration of the First Bank of the United States. It was founded during the administration of U.S. President James Madison out of desperation to stabilize the currency.
The Bank served as the depository for Federal funds until 1833, when President Andrew Jackson instructed his Secretaries of the Treasury to cease depositing the funds. Two refused to obey, so he fired them, one after the other, until he got one who obeyed: Roger B. Taney, his former Attorney General and the future Supreme Court Chief Justice. This decision was an aspect of Jackson's famous dispute with the Bank's president, Nicholas Biddle. The Bank, always a privately owned institution, lost its Federal charter in 1836. It became defunct in 1841.
The end of the Bank as the federal depository resulted in massive losses, a call in of loans and a major depression in the United States. Fortunately for Jackson most of the voters blamed the bank president, Nicholas Biddle, but the anti-jacksonians started the Whig Party, later absorbed into the Republicans.
