Chapter XVI
Setting Up Lending Agencies

Now that we have killed the bankers' goose that for a thousand years has been laying them golden eggs; increasing in number of eggs as the years passed — just as the domestic hens of the long ago like the birds of the fields, laid only one batch of eggs a year, in the springtime when all life was multiplying; but now continue throughout the year, laying sometimes over 300 eggs a year; so has this bankers' goose that laid golden eggs: from a few eggs a year in the middle ages, she has come to lay billions a year — we must provide for the poor fellows.

They have always told us simps that they are lending us the depositors' money, and we have believed them!  They never had the nerve to say we are lending our money.  A small banker, whose capital was $10,000, said to me: "We have to lend the depositors' money.  Our capital is only $10,000; we have loaned $65,000; and our depositors' deposits are $68,000!"

The Government will let them lend only their own deposits, and such deposits as other depositors may subrogate to them for lending.  These must be kept on the books of the Depositories, and be disbursed by cheque.

Since we have executed the death sentence on the word banking, of course, they can't open up banks; so the Congress will give their business a name, and outline the rules of their lending deposit credits (they will not be permitted to lend money-currency, coin or bills.)

I suggest that the Congress give them the name of Deposit Lenders, prefixed with any descriptive term they may choose, say "The Austin Deposit Lenders; but always keep it clear before the public that they are lending deposits — their deposits and such deposits as other depositors' may subrogate to them (for interest) to lend.  Let the word money go too.

Let's emphasize that the lending of money, deposits, is a private right; and that we are going to guarantee that private corporations or lending agencies shall be protected in the exercise of this private right.

It shall be provided that when the Lenders make a loan, they shall use a special form of note, provided by the Depositories, which shall recite the terms of the loan, the principal and rate of interest, the time period of the note if it is to be paid in one lump sum; or the instalment periods and the amounts of the instalments, if paid off in instalments.  The borrower signs the note, and such mortgages or security requirements as the lender may exact, and hands them to the lender; the lender then writes a cheque on a special cheque form provided by the Depository, and hands it to the borrower.  On this cheque are all the details of the loan, listing the chattels put up for security of the note, etc.

The borrower takes the cheque to the Depository the lenders must not be an adjunct of the Depository or in the same building.  The Depository gives the borrower credit for the cheque, and debits the lender's account an equal amount.  The Depository makes a photostat of the cheque, marks it paid, and puts it with other cheques the lender has given to other borrowers; and at the end of the month, these "paid" cheques will be mailed to the lender, for his files.

The photostat goes into the Depository files, and the face of the loan, the instalments, and all pertinent items on the cheque, are consolidated with all other lenders' loans handled through that Depository, and sent periodically to The Treasury of the United States.  All depositories will make similar reports, and from these reports consolidated, Congress may know at all times, the total loans of deposits the lenders have made, total unpaid instalments, etc.

This information is vital to the economy of the Nation, and keeps Congress alerted to malpractices which might turn up.  This would put the "loan shark" out of business, because it would be made a felony for any person or firm to lend another person cash, and take his note for it.  Only deposits could be loaned.  Congress, of course, would fix interest rates.

Then as a follow-up, and a completing of every loan, when the borrower made a payment, even a partial payment, on his note, he would have to use a special cheque provided by the Depository, which would have listed amount borrowed, amount still due, and the balance due after this cheque is credited to the lender; and when the lender presented the cheque for deposit with the Depository, the Depository would also photostat it, and handle it exactly as it did the lender's cheque, only it would go back to the borrower for his "receipt" and files.  That would make money lending simple, direct, safe for both lender and borrower.

Money lending, or we ought to always say "Deposit Lending," for "money" is and has been so long associated in our minds with currency, coin and bills, that when we say money lending, we naturally see money changing hands.  We have found that cash (coin and bills) is not money, a thing of value; but is a token to be used instead of a cheque against deposits, as a convenience, because it does not require signature or endorsement, and will be accepted by all sellers.

To repeat, Deposit Lending is a very essential part of our economy; for there will always be those who prodigally spend their income, spend more than they make, or even just as much as they make.  There will always be thrifty people who spend less than they make, and these naturally accumulate deposit credits they do not wish to spend.  Sickness, or some other emergency may confront the prodigal spender, and he must have deposits that he may eat, or pay hospital bills, so it is a service to him and to humanity in general for the lender, the thrifty fellow, to lend him some deposits to tide him over the emergency.

So deposit lending being a public necessity, those who have saved should be protected in their loans, and be paid for the use of their deposit credits, because these deposit credits are work translated into deposits.

Naturally lenders are going to run out of deposits because each time they make a loan, they will reduce their deposit balance the face of the loan. Too they have been used to an unlimited lending range, limited only by the whims of the Reserve Authorities.  This could rarely occur.

But now, under The Treasury Depository System, the Congress would know the entire story of their lending, its extent and its coverage; so if Congress felt that additional deposits to the credit of the lender, or lenders would be in the interest of the public's good, and not unduly increase the volume of money, Congress would say to the lenders, "Give the Treasury your note for the $10 million, and attached collateral worth three times the loan, say $30 million; and the Treasurer will give you a cheque which you may deposit in your home Depository, which will increase your loan range $10 million — not $50 million, as is the case under the Reserve System.  And all of that $10 million would be earmarked for lending.  An officer of the Deposit Lenders could not cheque out $5,000, and take the family on a world tour, or buy a yacht, or a ranch.  It would be for lending; and the regulation of lending would enable the Government to know that every dollar went to borrowers on loans.  The lenders would be compelled to live on the interest paid to them by borrowers.

At the end of the loan period, say ten years, the lenders would have to give the Government a cheque against their deposits for $10 million, which would lower their lending deposit back to pre-loan period.  The Treasury would not give the Government credit for the $10 million, which would automatically restore the total deposit credits to the pre-loan period, unless the Nation needed the additional deposits.  As the lenders paid the Government $300,000 interest each year, totalling $3 million, the Treasurer would place this to the credit of the Government, which would be spent by the Government in paying for services and goods.  It would be an "income" to the Government, to all of us, and would help defray the expenses of the Government.  It would not be new deposits.

Now, that would be putting the shoe on the other foot.  Under the Reserve System, Uncle Sam must borrow his own credit, and not only pay interest on it, but pay the principal, or continue paying interest forever.  Unlike the Bankers the Government would not take title to the $10 million loan, but would cancel it out, that it might not remain in circulation to cheapen other deposit credits.  And the lender's note would not be for sale — it would lie in Treasury until paid.

That would forever take the Government out of the borrowing category; it would forever stop the people's having to pay taxes to pay interest on a "national debt."  There would never be a national debt.

The Deposit Lenders would be protected in their field of lending, because the Government could not lend

Deposits to any person, corporation, or Nation, except to the lenders, as shown above.  And this would be a creative act.

Then Congress, the Government, would create "money" or deposits, and not lend it; and the lenders would lend deposits, but could not create them.  It would keep the Government out of "business" and would prevent the lenders' pyramiding the Government's "capital."

It would kill this "Creditalistic System" we have lived under, suffered under for 150 years.

We would have no system; we would have the mechanics of money simplified to the lowest point.  As shown, there would be no central clearing house; there would be direct connection between any Depository and any other Depository in the Nation; and The Treasury would be the Central Agency which would handle the Government's cheques, keep its deposits, print and mint money, the Depository cheques of the various forms, and keep all Depositories supplied with ample amounts and quantities of each.  It would have a supervisory control over the Depositories, but everything it did would be in obedience to the will of the Congress of the United States.

Wouldn't that be the finest thing you could imagine: Our nation not a debtor nation?  No private corporation with the power of life or death over all of us.  No 19 men, private citizens, bankers who have but one purpose, to make money for their stockholders, meeting tri-weekly, an arbitrarily putting more money in circulation, or siphoning it out.

Wouldn't it be good to send Morgan & Company back to New York, not as the masters of the Nation, but as run-of-the-mill Deposit Lenders?  Make Washington and Congress at our Capital masters of our deposits, and not New York, and the 19 private bankers?  And send the Morgan & Company's stock market angel, Barnie Baruch, back to his Hobcaw, his 17,000-acre Shangri La where he has entertained every president since Taft, and leading members of the House and Senate, as he coyly and masterfully brainwashed these public officials; where he entertained President Wilson and members of Congress when he masterfully manoeuvred the First Reserve Act through Congress, in 1913; where he entertained Roosevelt in 1934-35 when he manoeuvred a rewriting of the Reserve Act, exalting his beloved corporation stock above gold, giving us a Corporation-Stock-Standard for our money; where he has just finished entertaining Eisenhower and the members of Congress, securing the rewriting of the Reserve Act, omitting much, and adding much more, under the deceptive title "An Act-to Amend and Revise the Statutes Governing Financial Institutions and Credit," studiously refusing to use the term Reserve Bank, because bankers know that the sins of "banking" have about caught up with them?

Isn't it good to find that the strength and power and stability of our Government, and not chattels give our money (Deposits) soundness; and not fictitious portfolios prepared by bankers to deceive the Government and the public?

Isn't it good to discover that not the bankers' boasted wealth, or resources, has given us a stable government, a reasonably sound money?  Congressman Patman, in 1943, still fighting to protect the people from: the greed of the bankers, said:

"The present banking system, through the use of the Government's credit . . . proposes to finance the war (that is the Reserve bankers do) and issue more than $240 billion in money, and every bit of it will be issued on the banks - all banks combined — $8 billion capital and surplus and the Government's credit.  Of course it will be the Government's credit that will make it secure, as the $8 billion will be insufficient security . . . so the Government must pay interest for the use of its own credit."

Think of bankers saying that our $8 billion capital and surplus are ample security for issuing $240 billion deposit credits; when they always demand three times the loan in chattels as security when they make you a loan. Here they are saying our $8 billion is ample security for the $240 billion, just one-thirtieth the value of the new deposits it proposed to create!  Of course their wealth would be — but it is not obligated.

Won't it be fine, fellow slaves to the banking system, to have the chains struck from our necks and legs, and be free men again, with no overlord except our Congress which we choose every two years?

Think of not paying annually that $10 billion interest on a debt we gave the bankers; and then finally extinguishing the debt, and as a people, as a nation, be free of national debt thenceforward.

Having the $10 billion deposits provided by the Congress for the lenders to lend the people, earmarked "good for loans only," fits in with the Act of Congress setting up lending agencies, corporations for a specific purpose, the lending of deposits to borrowers, which would provide that no lending agency could buy corporation stock or other investment obligations.  They could only lend deposits to borrowers.  If a person wanted to gamble in the stock market, he would have to do it on his own.  This would take money lenders, who are chartered for public service, the lending of money, out of the speculative field, out of stock market gambling.

And they could not buy corporation stock, or real estate, or any other thing with their deposits.  But you would, on first impulse say, "But that would be interfering with a man's private right to do as he pleases with his money-lend it, or spend it for whatever he wanted."  No this would not interfere with a person's, a man's private rights.  It would only control "that person," a corporation; and since the Nation creates a corporation, it has the right to say what the corporation mayor may not do.  If a lender decides he had rather gamble his money in the Stock Market, he will have to withdraw from the corporation, and go it as a person, just a man.

This would limit the money available to play around gambling on the stock market to such a trickle, it would kill the business of selling watered stock, which is the stock-in-trade with stock exchanges, and bankers.

After World War I, when we were "booming" again, the Borah Committee (of the United States Senate) exhaustively investigated this watered-stock racket, and they found that corporations had watered their stock from a few percent of their legitimate stock, to as much as 168 times their legitimate stock.

In 1932-33 Doheney, chief of the Cities Service Gas Stations, issued $30 million in stock, with the usual fraudulent statement: "to extend and improve our service."  When the $30 million cheque came in for the stock, Doheney promptly credited his own personal account with $16 million.  He bought, with $11 million, the Kansas City Star.  It is a common practice now.  When a corporation sells a new issue of stock, the officials may cheque that stock out to buy anything from a purple cow to a million dollar addition of equipment.

That's phoney, hot-cheque money competing with the people's earned dollars.

There could be no lending agencies failures; for every loan they made would be secured by ample chattels; and the Congress would trim the interest rate to that point where the lenders could not take usury from the borrowers.  There could be no watered stock sold.  Hence there would be no profit in stock exchanges, and they would disappear.

Morgan & Company, as with many smaller banks, is a stock-market promoter and gambler first, and banker second.  They do not use their banking facilities to stimulate honest, essential industry, but to promote profits through the stock market.  Bankers use the stock markets to swell their incomes just as they lend money.