There is a widespread belief among men who have knowledge of world movements in the broader fields of industry and international politics that there is something like an actual conspiracy among the world's financial magnates to create a financial super-government, to control the social and economic future of mankind.  Conspiracy or not, there is little doubt that there now is power in the hands of financiers that, if it be not soon controlled, will enable them, at their own time and choice, effectively to control the world.  There is no doubt that, even now, finance has more than half enslaved the world.

The method of this enslavement is, in part, through the usurpation of the sovereign power of the state to issue money;  in part, by the perversion of the purpose of money from a medium of exchange to the creation of interest-bearing debt.  But the real evil is that, in the present money system, we have an expansible and contractible 'concertina' instead of a currency.

Considering the question of a conspiracy, we have vague reports of recent days that the chief financial powers of the world were 'in conference' on the Riviera, the playground of Europe, in August.  'Among those present' were Hjalmar Schacht, the head of the Reich's Bank of Berlin, Montague Norman, head of the Bank of England, Benjamin Strong, Governor of the Federal Reserve Bank of New York, Andrew Mellon, Secretary of the Treasury of the United States and ex officio head of the Federal Reserve Bank Board.  We are also informed that the representatives of the world's leading banks are accustomed to hold periodical conferences.  Considering these indications, there is reasonable ground for a study of legislation pending in Congress relating to our financial program, and its possible bearing on the part American finance may be expected to play in the future, as a factor in world finance.

To present all the evidential facts afforded by the record and tending to support the belief in the conspiracy suggested, would require volumes.  Yet a brief statement of certain facts, with a rational interpretation, should indicate the necessity for a thorough exposition of the whole subject of our financial system, before further commitment to a policy fraught with incalculable peril to our individual and national welfare.

The existing system of American banking is the outgrowth of a long and painful experience ---an experience reaching back to the Revolutionary War ---when, in 1781 and 1782, the Bank of North America was established as an agency to finance the thirteen colonies in their war for independence.  Since that time, no single public question has absorbed so great a share of attention as the 'money question,' and even now there hangs over it a sort of semi-religious mystery ---a superstition that only a few are fitted to speak with authority on the subject.  Yet there is in it no mystery whatever, except such as ignorance and misinformation create in any field of thought or science.

In Jackson's time, the whole range of public finance was covered by minds as able, inspired by as pure a patriotism, as our country has ever known.  During the war between the states, when the greenback was made to do the work the bankers of the nation had refused to do;  when the national banks were created;  during the greenback campaigns of the 'seventies,' later, in the silver agitation, followed by the discussions of the 'nineties,' down to the acute struggles over the Vreeland-Aldrich Bill of 1904-5, the so-called 'Asset currency' bill:  During this whole 145 years, the money question has been a live source of debate and controversy.  On no subject is there a larger body of literature, a richer mine for the student of our history or the philosophy of our institutions.

At every contact throughout our history, the issue on this question has been as to where the power to issue the people's money shall be lodged.  The Constitution imposes the duty of issuing money and regulating the value thereof upon Congress as a legislative act and function.  The bankers of the land have contended for this power from the beginning.  Under the Federal Reserve Bank system, Congress has delegated to the banks this legislative power to issue the people's money and to regulate its value and has made the Government a guarantor of the Federal-Reserve-Bank-system paper notes.

It is proper, here, to consider the heart of the whole problem, and the source of that frantic zeal with which the friends of the Federal Reserve Bank system contend for still further powers and a guaranty of unlimited peaceful possession of their extended powers.

Possessing the power to exercise the sovereign function of the Government to issue money, these banks issue, or withdraw, money (their notes) and credit, by lowering or raising discounts in such volume and at such times as suits their discretion and private purposes.  These banks are all private concerns, as declared by Mr. Strong, Governor of the Federal Reserve Bank of New York City, in a statement before the Agricultural Commission.

But the power to issue their notes as money is valuable to these banks, much more by reason of the further power it gives to issue and control the volume of bank credit ---or money of account--- which is the sole stock in trade of the banks. Possessing this power the banks, considered as a system, a unit, are able to control the amount of money and the volume of credit that is in use at any time;  and thereby to affect the market prices of all things, either service or commodity, that are offered for exchange.  It is quite clear that the more abundant money is, the cheaper it is in the market;  it takes more money to buy things than when money is scarce.  And the same principle applies to credit as to money or shoes, potatoes, stocks, bonds, securities, or anything else that is bought or sold on the market.

It can be seen that unless and until the bank system came into possession of this power to control the issue of the people's money ---that is, if the Government had retained its power to carry out the mandate of the Constitution to issue money--- the bank system would have no monopoly;  would have no power to control the movement of prices in the open market, by opening or closing the floodgates of money and credit 'at their discretion.'  This is the main prize at stake in the money controversy.  There are other trifles as well, but these will be considered later.

With the foregoing as a clearance, consider the present condition of the field.  Congress adjourned on July 3, leaving hundreds of bills without action.  Among these the so-called McFadden Bill was the most important, if we consider its purposes and the probable consequences of its enactment into law.  This bill is a proposed amendment of the Federal Reserve Bank Act of 1913, that created the Federal Reserve Bank system, that began operations in November, 1914.  This Federal Reserve Bank Act was the outcome of a persistent drive by certain bank interests to secure legal sanctions for practices that had been denounced by the official report of the Pujo Committee of 1912.  This committee had been appointed to investigate the charge that there was a money trust in operation in the United States.  There were 'hearings,' at which many witnesses, experts, authorities, bankers, merchants, manufacturers, transportation men and others, testified at length.  A voluminous report was submitted, in which the committee said in substance that, in all the essential elements of a trust, there was a money trust that dominated the business activities of the United States.  This, in 1912.  The subject became a feature of the volcanic political campaign of that year.  The result of that campaign demonstrated the hostility of the people to the 'trust' principle, in banking and credit control.

It was obvious that the trust practice must be abandoned, or so disguised as to elude public resentment.  The Pujo report pointed out by name the men and banks it deemed responsible for the money trust.  Trust practice in credit control was not new to the men who framed the Federal Reserve Bank Act of 1913.  They were the same men to a large extent who had framed the Aldrich-Vreeland Act of ten years before.  They had practised credit control so effectively and so disastrously to every interest except their own, that the hounds of public opinion were following close upon their tracks and forced them to seek sanctuary under a statute of legitimacy ---the Federal Reserve Bank Act.

In May, 1920, on the eighteenth day of that month, at a secret meeting of the Federal Reserve Board and its council, in the City of Washington, it was decided, in their 'discretion,' and over the protest of certain members, to 'raise discounts.'  This had the effect of destroying the credit structure of the nation that had been built up during six years of the most intense industrial and economic pressure to increase production.  The world knows the result.  In 1924, their discretion suggested the necessity of lowering discounts;  they lowered them and the world knows that the Progressive Movement, LaFollette and all he stood for, was, for the time being, flooded out by a wave of artificial prosperity that followed.  Was this the result intended by this exercise of 'discretion' ?

Another of the results intended is indicated by certain suggestions from the official head of the Federal Reserve system, Mr. Mellon, who is reported as saying, in the May Nation's Business (house organ of the United States Chamber of Commerce):  'A political attack' against the Federal Reserve system must be expected, 'when the time comes for renewal of its charters,' and 'its effectiveness will largely depend upon the particular phase of the business cycle which happens to prevail at the time.  If the country is then in the midst of a wave of prosperity, the opposition will be slight.'  There are other significant suggestions in Mr. Mellon's statement as reported in the Nation's Business, to be considered later.  But Mr. Mellon is, as Secretary of the United States Treasury, the official head of the Federal Reserve Board, and, therefore, of the Federal Reserve Bank system.  It is something of a question whether Mr. Mellon runs the system, or the system, through Mr. Mellon, runs the Treasury;  but either way, Mr. Mellon knows from past experience that, between himself and his board, they should be able to develop a wave of 'prosperity' just when and to the extent necessary to put over the so much desired renewals.

There are two highly important features of this McFadden Bill:  one of these is the charter renewals of the Federal Reserve Bank.  As is known, the present charters expire in 1934.  It is one purpose of this bill ---which is an amendment to the Federal Reserve Bank Act--- to extend these charters.

Aside from the apparently unnecessary haste in anticipating the expiration of the charters by eight years, it is important to consider the modest demand for what is in effect a perpetual charter ---a so-called 'indeterminate' charter.  Senator Pepper, in charge of the bill on the floor of the Senate (Congressional Record, April 28, 1926, page 8353), said, in answer to a direct question:  'Does it (the Federal Reserve Board) approve of the provision giving the indeterminate charter ?'

Senator Pepper:  'That has been proposed a number of times by the Federal Reserve Board and is favored by the board in the form in which it is embodied in this bill.'

Another feature of the bill which calls for remark, as illuminating the intentions and ultimate purposes of the Federal Reserve Board and Bank system, is the provision authorizing banks in the system to deal in 'investment securities.'  This will be discussed in a subsequent issue.

Last week we discussed certain provisions of the McFadden Bill, and in the concluding part of the article called attention to the portion authorizing banks in the Federal Reserve Board and Bank system to deal in investment securities.

To get the full import of this provision requires a knowledge of the purposes of the Aldrich-Vreeland ---'Asset Currency'--- bill of 1905.  Under the provisions of that bill it was intended to authorize banks to use the securities, stocks and bonds of American corporations, as the basis of issues of bank notes, and as 'reserves.'  The McFadden Bill goes even further, in that 'investment securities' of this period ---and for probably an indefinite future time--- include not only securities based on American public utilities and industrial corporations, but also stocks and bonds of foreign corporations and governments.

With Federal Reserve Banks issuing the money of the American people on the basis of foreign debts, instead of a basis of actual American wealth, and having it guaranteed by the American Government, one can readily see the possibilities.

The proposals of the Aldrich-Vreeland Bill, intended to make the Government a guarantor of the values of watered and ballooned securities, representing chiefly capitalized privilege;  with the further purpose to forestall the possibility of any change in public policy as to the regulation or control of industries or services by political industries, failed to become a law.  It was a program to monetize specific forms of property.  But, having opposed and defeated the monetization of silver, they found it impossible to monetize incorporated paper;  so the bill became a regretful memory.  Yet the spirit that inspired it was not laid;  the men and the interests behind it were very much alive.

While individual men make mistakes and even die, the class never makes a mistake and never dies.  The same men and the same interests that planned the bill of 1905 also planned the Federal Reserve Bank bill of 1913 ---and also the McFadden Bill of 1924.  To 'get by' with the Federal Reserve Bank bill, they were forced to drop the 'Asset-Currency' feature of the old bill ---also, to arrange for twelve 'Regional Banks,' instead of one central bank, as intended in the old bill.  Paul Warburg was consulted and, as he says, 'gave the best advice I could.'  He was consulted by the chairman, Aldrich, of the 'monetary-commission,' and that resulted in the Aldrich-Vreeland Bill.

When the Federal Reserve Bank Act was enacted, Mr. Warburg testified that certain defects in the bill could be 'corrected by administrative processes.'  And Mr. Warburg was made the first president of the Federal Reserve Bank Board.  Yet, Mr. Warburg was, as he testified, 'a prominent member of one of the banking firms' denounced in 1912 as a member of the 'money trust.'

As far back as July 19, 1841, John C. Calhoun, discussing a Monetary Measure [a loan of 12 million dollars], said on the floor of the Senate:

'But why all these sacrifices, amounting, I may safely say, to millions in this single transaction, in favor of banks, brokers, and stock-jobbers ?  How is it to be explained ?  If this body, instead of being a Senate of the United States, was a deputation from Wall Street, sent here to arrange the details of the measure, we would not be at any loss to understand why they are arranged as they are.  They are all contrived, in the best manner, to suit their interest, without, apparently, any regard to the interest of the Government.  But we are not such a deputation.  We are the representatives of the twenty-six sovereign States of this Union,'
....
'The Government, in a word, borrows back its own credit, through the banks, at the rate of six per cent., when it might use it directly, with equal convenience, for nothing at all.  Thus thinking, I regard the whole amount of interest which may be paid for this loan, and which for three years would be more than $2,000,000, to be but little more than a donation to banks and brokers.  No wonder, then, that Wall-street should shout and clap its hands for joy, on its passage through the other House.'

This bill has been before Congress for more than two years;  it has twice passed the House [January 14, 1925; February 4, 1926].  It has passed the Senate (May 13, 1926), and since then has been before a conference committee of both Houses.  It is an administration measure [Mr. Coolidge is President].  Mr. Mellon is Secretary of the Treasury and, therefore, ex officio head of the Federal Reserve Board and Bank system, which is known to favor the bill, as the statement of Senator Pepper has made clear.

A survey of banking as a business discloses conditions and considerations that make legislation on the lines of the McFadden Bill vital and imperative, if the Federal Reserve system is to continue.  There are just about 30,000 banks in the United States.  The number varies slightly from day to day.  There are just about 9,000 of these banks within the Federal Reserve system.  More than two-thirds of all banks are outside the system, and the outside banks have larger resources than those within the system.  There was bitter opposition to the Federal Reserve Bank Bill when it was pending in Congress, and there has been constant opposition to the law since it was enacted.

To keep the record straight, it should be further stated that the Federal Reserve Bank Bill could never have become a law without the personal appeals of W.J. Bryan, then Secretary of State.  Also, that Mr. Bryan afterward published his repudiation of the law.

Senator Robert L. Owen, Chairman of the Senate Committee on Finance, and whose name was given to the bill, as the Glass-Owen Bill, also denounced the administration of the law by the Federal Reserve Board, as being contrary to both the ostensible purposes and the specific promises of its proponents.  John Skelton Williams, controller of the currency and ex officio a member of the Board, also denounced the administration of the system.  The working of the Federal Reserve Bank law has not been approved by the nation's bankers.  A great many banks, that were members, have surrendered their charters and become state banks.  In the last two years, 166 banks, some of them of large resources, and wide influence (according to Mr. McFadden) have deserted the system.

The failure of banks to join the system and the withdrawal of other banks from the system became so important as to have a joint Congressional Committee appointed to investigate the matter.  Mr. McFadden was the chairman of this committee.  It held inquiry, heard evidence in many cities, visited banks and questioned bankers and business men generally.  For some reason this committee has never made or published any report.

At a recent hearing in the Banking and Currency Committee of the House Mr. McFadden, chairman, Adolph Miller, who has been a member of the Federal Reserve Board from its inception, testified that the board had raised and lowered discounts entirely 'at its discretion';  that is, it had played the 'concertina' at will.  It is not to be wondered that the great majority of American bankers refuse to place themselves and their patrons under an authority as arbitrary, as irresponsible, as Mr. Miller states the Federal Reserve Board to be.

It is conceded by Mr. McFadden that, unless the outsiders do come into the system, and those inside quit going out of it, the system will soon be in a very bad way.  He says, 'If they (the banks in the system) are not equipped for survival (in competition with other banks and banking agencies), the system will die at the roots and perish.'  The board and banks within the system look upon banks outside the system as 'bootleggers' of credit.  It is the purpose of the McFadden Bill to coax outsiders to come in, quit 'bootlegging,' and, since they cannot be driven in, to offer them such inducements to come in, in the way of larger powers ---prolonged security of chartered life--- also, by imposing certain restrictions on the practice of outside banks as will effectively intervene in the operation of natural economic laws, to build up a monopoly in the control of credit.

It will be asked, how a program fraught with such possibilities of power could have been brought to the very threshold of success with no protest ?  The answer is because the meaning of the bill has been concealed.  There has been no important debate upon it;  it was misnamed as the 'branch-banking' bill from the start;  the vicious 'asset currency' feature was 'camouflaged' and the charter extension feature was not in the bill until introduced in the Senate, where the bill has not had an hour of attention an the floor of the Senate.

The 'branch-banking' feature of the bill has absorbed the bulk of the time spent on the measure, and has been the 'herring on the trail' to distract attention from the more vital features.

In some states banks are authorized by state laws to have branches in other cities than the home city of the parent bank.  In other states branch banks are unlawful.

In Congress, the controversy between the House and the Senate, and which is now pending before the Conference Committee of both Houses, turns on the disposition of this question.  Both Houses are agreed that where a state permits branch banks, the banks in the Federal Reserve system shall have authority to establish branches.

The Senate insists that when and if a state, that does not now permit branch banks, modifies its policy to admit of branch banks, then, by automatic consequence, banks in the Federal Reserve system shall, without further action by Congress, be empowered to establish branch banks conformably with the law of the state.  The House insists that banks within the Federal Reserve system shall be further authorized by Act of Congress before they shall have power to establish branch banks in states that hereafter shall authorize branch banks.

All that seems a matter of small importance compared with the principle of branch banking in itself.  The natural tendency expressed in branch banking is not expansion but concentration;  it is the abolition of competition and the development of monopoly, and is hostile to the interest and welfare of all who depend upon an unrestricted flow of credit.  As above intimated, it is not a monopoly of money that constitutes the evil.  It is the monopoly of credit that is the evil.  Money and credit are related exactly as the stock and the lash of the whip, and he that wields the stock throws the lash.

Branch banks simply manifold the lash;  carried out to its practical possibilities, it restores the single central bank idea of the old and denounced Aldrich-Vreeland Bill.  The combination to coax outside banks to come in ---the proposed, or contemplated, restrictions on state and other banking outside the system--- with an indeterminate charter, or, in effect, a perpetual charter and universal branch banking authorized by law, the system will be equipped not merely to survive but to destroy all competition.

This is the object of the long campaign.  A campaign that has developed something of the best and much more of the worst that is possible under a democracy.

It has been a superstition of American democracy that the larger knowledge implies the larger life.  But facts in the way of periodic unemployment ---factories idle, or working only part-time;  land going out of cultivation;  social despair reflected in waves of crime;  respect for law vanishing in the face of laws unworthy of respect;  the confusions of a society developing on the quicksands of political policy that violates every natural principle of economic law:  these spell a very different lesson.  A political theory that contradicts economic law is also a contradiction of the moral law, since truth is a unit and does not ---cannot--- belie itself.

There cannot be a sound philosophy for finance and another, a different philosophy, for farmers, or mechanics, or any other.  Unless, your philosophy explains and unifies the experiences of all men, of all classes and avocations ---unless, that is, it deals in universals--- it is a false philosophy and the truth is not in it.

To give the illusion of florid health to a leg or an arm of the human body, one can bind tightly about it a band that will arrest the circulation of the blood:  it is not health but disease that results ---disease that, if allowed to continue, will bring death not only to the limb, but to the whole body.  The apparent prosperity, that is the evidence of a diseased body of the state, the surplus of blood that plumpens and purples the arm of high finance, is drawn from all other parts of the body:  the pumping heart strives in vain to carry it back to the place whence it was drawn.  The band about the limb is monopoly ---even a monopoly of monopolies--- the stranglehold of high finance.

The coming conflict lies not between the poor and the rich;  not between capital and labor.  It lies between science, understanding of Nature's laws, on the one hand, and 'finance,' with its horror of social progress, on the other.  Scientific progress is one thing;  social progress is another phase of the same thing, which is human progress.  Any one knows what is meant by scientific progress;  few will agree as to what is meant by social progress.  Yet social progress is the social realization of scientific progress.

While monopoly stands between men, to intervene in and deform the operations of Nature's laws, there can be no social progress.  Therefore it is that the vaunted scientific progress of our time continually tends to dehumanize the race.  Yet not for always, not for long.  Nature has mysterious ways of righting wrongs and caring for those of her children who are worthy of her care.

https://www.federalreservehistory.org/essays/mcfadden-act

In 1924 Representative McFadden introduced his bill in the House.  Who and what inspired that bill ?  Was it hundreds of farmers writing letters to Chairman McFadden, pleading for more branch-banks ?  Was it factory workers ?  Small businessmen ?  Or was it the Bankers' Association ?

New York Times reports on November 3, 1925.

"At a meeting of the Executive Committee of the Merchants' Association yesterday two resolutions relating to the rechartering of the Federal Reserve banks and the extension of their charters for an indefinite period were adopted.  The committee acted on a report made by Paul M. Warburg."

In 1925 and 1926 it was pointed out in the House, during the debates of McFadden's bill, that branch-banking can only lead to banking monopoly;  his bill was accused of having originated from bankers;  Representative Wingo, who in 1913 supported and voted for the federal reserve bill, voted against McFadden's bill exactly because of the evils and dangers of branch banking.

Representative Knud Magnus Wefald(1869-1936) from Minnesota, representing the Farmer-Labor Party. 1925 January 14.

"Mr. Speaker, it is almost impossible for me to visualize bankers coming before Congress and asking for legislation in the interests of the people.  The McFadden bill is purely a piece of class legislation, and as such I am against it.  It is not claimed for it that its passage will benefit the people in general.  Its passage is asked in order that the national banks may be benefited.  The main purpose of the bill is to sanction and extend branch banking, to a limited extent to be sure, but it will be an entering wedge, if passed, that will in a short time drive the small bankers out of business and the local banks out of existence.  The proponents of the bill say that the national banks and the Federal reserve system is threatened with dire calamity through the inroads into the banking business by the State banks.  To get justice for the poor, down-trodden, big national banks ---the small banks are not considered--- the proponents ask for perpetual charters and the right to establish branch banks.  A few minor favors are asked for, like the increase in the loan limit to individuals and extension of time for loan periods on city real estate from one to five years.  These demands are supposed to tickle the small-town bankers and line up their support for the bill."

Representative James Herbert Sinclair(1871-1943) from North Dakota.  January 14, 1925.

"To my mind, the present bill is the most flagrant attempt at class legislation which we have had in this Congress.  Under the guise of stamping out the evils of "branch banking," the real purpose of the bill is to grant additional special favors to the big national banks in the large commercial centers of the country.  Here is the actual situation confronting us.  Branch banking has been permitted and encouraged in the East, particularly in the State of New York, and in the Far West, especially in California.  It has assumed alarming proportions in these two sections, and is fast driving the small independent bankers there out of business.  It is recognized as a danger in the banking world.  If permitted to spread, it will change our whole independent system of banking, and it will not be many years before we will find ourselves under a system such as Canada and most of the European countries have."

Representative Otis Theodore Wingo(1877-1930) from Arkansas.  February 3, 1926.

"I really have grave doubts about whether we will be able to keep in this bill all the checks that have been sought to be put on it.  I think the bill is going to pass;  I know it will in the House.  I am not going to vote for it, but, as a practical man, I want to try to keep everything in it I can to check this evil of branch banking.  I do that with a good deal of hopelessness;  but I have said to the committee, and, I think, previously upon the floor once before, that I am fearful this evil is going to spread over the country."

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Friday, June 10, 1932.
Mr. McFadden.

"Mr. Chairman, when the Federal reserve act was passed the people of the United States did not perceive that a world system was being set up here which would make the savings of an American school-teacher available to a narcotic-drug vendor in Macao.  They did not perceive that the United States was to be lowered to the position of a coolie country which has nothing but raw materials and heavy goods for export;  that Russia was destined to supply man power and that this country was to supply financial power to an international superstate ---a superstate controlled by international bankers and international industrialists acting together to enslave the world for their own pleasure."

Representative Strong of Kansas responded to McFadden's speech:

"Mr. Chairman, I have not the time to refer to the many charges he [Mr. McFadden] makes against the Federal reserve system, but I call attention to the fact that for 12 years he has been the chairman of the Banking and Currency Committee of this House and did not see fit during that time to try to remedy any of the evils of which he now complains.  It seems to me entirely out of place to wait until he is retired as chairman of that great committee and then assault all of the institutions of which it has control."

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If the February 25, 1927, McFadden Act had not perpetuated the charter of the Federal Reserve System, in 1933 the Fed would have had to come before Congress and ask for the re-newal of their charter.  During the ensuing debates, perhaps, Mr. McFadden could have done some good for the people and some damage to large banks.  As it was, his talk in 1932 and 1933 was just that, talk after the barn was burned down and the horses were turned into wieners.

In 1932 and 1933 Louis McFadden acted as if in the 1920s he had had nothing to do with the Federal Reserve and large banks;  as if he hadn't benefited them.  His behaviour was similar to Robert Owen's behavior.  In 1913 Mr. Owen was instrumental in guiding the Fed bill through the Senate, but by the 1930s he, too, presented himself as some champion of the people's cause.

On February 12, 1917, Representative Lindbergh read his impeachment articles into the Record.  What did Louis McFadden do then, did he support Lindbergh ?  If he heard what Lindbergh said about the Federal Reserve (although he was absent from the House on that day), how come it was news to him in 1932 ??

McFadden took his seat in the House of Representatives in March 1915.  Most of the people who participated in the debates and passing of the Federal Reserve bill were still there.  In the next five years didn't he learn a thing or two from them ?

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On Monday, January 4, 1926, the full text of Mr. McFadden's this here address was entered into the Congressional Record at the request of Senator Copeland (page 1394).

Address by Honorable Louis T. McFadden, chairman of the House Committee on Banking and Currency, at the opening of the Fordham National Bank in New York City, January 2, 1926.

"I assert that it is not only lawful and constitutional but morally right for Federal sovereignty to establish the rules and regulations for the conduct of business by the greatest fiscal agency it has ever created ---that is, the Federal reserve system--- for if it should surrender its sovereign right to exercise complete control over its fiscal agency, its power would be surrendered to the power of 48 sovereignties, and the Federal reserve system, created for the benefit of all of the people, would begin to disintegrate and go to pieces, and in its place there would be set up various groups of banking control that would not and could not be united.

"When this bill is enacted into law, many large national banks, which are on the verge of going over into State banking system, will change their minds and remain in the national banking system, and many other banks, which have surrendered their national charters, will come back into the national banking system, and the final result will be a building up and strengthening of both of the great fiscal agencies of the Federal Government, namely, the national banking system and the Federal reserve system."

Yes, in 1926 Mr. McFadden considered the Federal Reserve System the greatest accomplishment since the bread-slicing machine was invented.  From Mr. McFadden's remarks we may conclude that without the McFadden Act the Federal reserve might have gone out of business on its own.