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PART 1 of 2


By Marilyn Barnewall

November 28, 2008

To whom should we listen about banking, the stock market, the economy? There are so many differing analyses right now, it is difficult to know.

One opinion is that Wall Street is sitting on $50 plus trillion in leveraged assets and the United States government has a $5 to $6 trillion gross domestic product (GDP). There is, this opinion says, no way to avoid a total meltdown.

Today I read an analysis by Stratfor, whose opinion I respect tremendously. Stratfor says we must focus on the political realities, not the economy. Using this strategy, Stratfor had been correct in predicting many things Wall Street, the Treasury, the Fed, and economists around the world have missed. Stratfor says we will have an ugly, painful recession, but the “fall of the housing markets will be trumped by the size of the American economy.” They see the core problem as the fall of the housing markets and approach problem resolution from that perspective.

Like Stratfor, I believe it is right to look at things from the geopolitical perspective when defining our economic problems. Governments around the world are acting in tandem – that in and of itself is a rare occurrence – to “solve the financial crisis and prevent a meltdown.”

Unlike Stratfor, I do not believe the core of the geopolitical problem is the value of housing. I believe the core problem is a worldwide government bid to establish a global government. They have been trying to accomplish this since the early 1900s. The people of the world do not want it and so they must face crisis after crisis so potentially devastating to modern life they can be frightened into accepting what the world’s central banks want.

Now, in some quarters, making that kind of statement gets one labeled a “conspiracy nut.” Maybe I am a conspiracy nut. Maybe I’m not. Maybe those who prefer to look at the world through rose-colored glasses and see governments as solving problems rather than causing them are the conspiracy nuts. They conspire to trust governments around the world… until necks are safely held under the black boot of totalitarians.

What is the conspiracy that makes them rather than me “conspiracists” by definition?

They believe governments are good, not self-surviving totalitarian organizations that crave more and more power, more and more wealth. They believe the Federal Reserve is looking out for the American people… they even think the Fed is part of the government.

All I can say is, when one “nut” has more evidence on his or her side than another “nut,” the one with the least evidence must concede defeat and accept the title “conspiracy nut.” It is obvious that I believe I have more evidence on my side of this argument than do those who think governments around the world are driven to do good for the people rather than oppressing them more and more.

Let’s go back in time.

How was our financial services industry structured? This is an important question because the regulations in place from the 1930s until the 1970s were put in place to protect America from another Great Depression.

Savings and loans were established as the primary underwriters of American mortgages. When granting a mortgage, it is a 20 to 30 years financial commitment by a lender. Because the world of business and consumer banking moves quickly, and because the cost of funds are volatile, S&Ls were established for the specific purpose of making long-term mortgage loans. Commercial banks did not make them. And, there was no problem with bank liquidity because bank loan commitments are relatively short-term by comparison to mortgages. A commercial bank must know from day-to-day that it has sufficient funds on hand to deal with business and consumer borrowing needs… difficult to do when your deposits are tied up for 30-year mortgages.

We had Regulation Q. It said that savings and loans could offer one-quarter of a percent more in savings interest than commercial banks. S&Ls were required to pay 5.50 for long-term savings and 5.25 percent for short-term deposits. Commercial banks were required to pay 5.0 percent on short-term savings and 5.25 percent on “time” savings – like a certificate of deposit or a “time” savings account.

We also had commercial banks. Their primary business was to take in deposits for checking and savings deposits and loan that money out within the community at a profitable rate. By doing so, they stimulated business and, thus, job growth. They were not allowed to branch across state lines. In many states (like Colorado, Illinois and Texas), they were not allowed to branch within the state where a bank’s corporate headquarters was located. When did that change and why?

In the mid-1970s, the Comptroller of the Currency (who has no authority to change the laws passed by Congress… its job is to oversee regulatory control, not change it) issued an opinion that banks could become bank holding companies. A bank holding company in non-branch banking states (called unit banking states) could, in the Comptroller’s opinion, open other banks under the same bank name provided that each new bank opened had its own Board of Directors, its own letterhead. It had to be independent from the large bank that funded it.

The creation of branch banks in non-branching states was a necessary piece of the plan to implement interstate branching which would come later.

In Colorado, Governor Roy Romer all but promised the independent bankers in the state that he would not support in-state branch banking. The Colorado House passed House Bill 1111 banning interstate branch banking on February 7, 1995. On February 21, 1995, the Senate approved its version of the same legislation... banning interstate branch banking in Colorado.

However, after receiving a telephone call from President Bill Clinton (and, it is rumored, from NationsBank -- now Bank of America), Governor Romer decided he wanted branch banking.
Clinton told Romer that all sorts of calamities would befall Colorado banks if the branching legislation at the state level did not get passed. Romer passed that information on to Tim Foster.
Foster was the Colorado House Speaker and pushed the legislature, having been told Colorado would be in violation of the law if the legislation did not pass. I called Foster right after the legislation passed and asked him what in the world he thought he was doing, violating the laws of the State of Colorado. He is the one who told me why he, a Republican, became so supportive of getting legislation passed for a Democrat governor. The above story is a direct quote from Foster.

Shortly after the above transpired, Roy Romer was made the head of the Democrat National Committee where he served for several years. Later he accepted a highly-placed position with the Department of Education in California. Foster has been the President of Mesa State College for a number of years.

Why did Bill Clinton make that phone call to Governor Roy Romer? Because. The interstate banking plan could not be implemented unless all 50 states accepted branch banking and it was part of an overall plan to implement the credit crisis we have today.

Once all 50 states allowed branch banking, the Comptroller decided it was okay for banks to use bank holding companies to establish banks in other states… a direct violation of the McFadden Act. Suddenly, we saw First Interstate Banks all over the western United States. We saw NationsBank of North Carolina owning banks in Florida and Citibank moved into California and Arizona. Until this time, the McFadden Act prevented interstate branch banking – intrastate branch banking laws were controlled by each state. To my knowledge, the McFadden Act has never been over-turned… just ignored by the Congress.


The Honorable Louis T. McFadden, Congressman from Pennsylvania, leveled charges at the Federal Reserve Board on the floor of Congress that would have made the most aggressive conspiracy theorist blush.

McFadden accused the Federal Reserve of swindling the U.S. Treasury, of conspiring with their foreign principals (central banks in other nations) and others to defraud the American government. Thus, the charges I would make against the Federal Reserve in 2008 were first made in 1932 by a U.S. Congressman.

As if that were not enough, McFadden further told his compatriots on the House floor that the Fed had “…robbed the U.S. government and the people of the United States by their theft and sale of the gold reserves of the U.S.”

On June 10, 1932, Congressman McFadden launched a twenty-five minute tirade against the Fed. Some of his remarks:

"Mr. Chairman, we have, in this country, one of the most corrupt institutions the world has ever known. I refer to the Federal Reserve Board and the Federal Reserve banks. The Federal Reserve Board, a government board, has cheated the government of the United States out of enough money to pay the national debt.”

McFadden continued: “The depredations and the iniquities of the Federal Reserve Board and the Federal reserve banks acting together have cost this country enough money to pay the national debt several times over.

“This evil institution has impoverished and ruined the people of the United States; has bankrupted itself, and has practically bankrupted our Government. It has done this through defects of the law under which it operates, through the maladministration of that law by the Federal Reserve Board, and through the corrupt practices of the moneyed vultures who control it.”

I would make those same charges today.

On May 23, 1933 - less than a year after his 1932 tirade - Congressman McFadden brought formal charges against the Board of Governors of the Federal Reserve Bank system, the Comptroller of the Currency and the United States Treasury. He charged them with "numerous criminal acts, including but not limited to, “conspiracy, fraud, unlawful conversion, and treason."

The petition for Articles of Impeachment was referred to the House Judiciary Committee, but no action was ever taken by the Congress. It was never rejected or acted upon. Looking at Congressional records, it appears McFadden’s charges are still pending against the Fed.

McFadden saw the Federal Reserve and the nationalization of our banks as a great threat to the freedom and the individual wealth of the American people. In 1927, he authored the McFadden Act and fought hard to get it passed by the House and the Senate.

It’s purpose: To prevent interstate branch banking.

McFadden felt he could hold what he perceived as a power-hungry Federal Reserve in check. He thought he could keep them from becoming too powerful. The way he did it was to limit the banking industry’s ability to establish branch banks over state lines.

For almost 70-years, this Act pre-vented interstate branch banking.

The waters are very murky, indeed, as to whether interstate branch banking legislation is legal. It may violate federal law... the McFadden Act of 1927, and the National Bank Act of 1863. I can’t say I have the greatest understanding of how federal law works, but I always thought that you could not write a new federal law that contradicts an old federal law without repealing the old law.

Back to what we used to have and why it’s important:

We had the Glass Steagall Act. Actually, there were two Glass Steagall Acts, but the one with the most bang for bank bucks was Glass Steagall II and it is to that I refer herein. It was passed in 1933 and the official title is the Banking Act of 1933.

During the Great Depression, Congress undertook to examine how conflicts of interest existed in some commercial banks because of their involvement in securities. Even fraud was discovered. Glass Steagall II built a brick wall between the activities of commercial banks and investment banks.

Investment banks like Merrill Lynch, Bear Stearns, Lehman Brothers and Goldman Sachs did not take deposits like commercial banks and savings and loans. They were not commercial banks. Their entire job in the universe was to sell stocks in America’s publicly-traded companies. Commercial banks were prevented from selling securities or making investment recommendations.

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The above reflects how America’s financial industry was structured until the 1970s. Part II of this article will explain how the safety walls put in place have been eliminated, one brick at a time and, from the author’s point of view, very intentionally. Article II will explain how the changes to the safe structure that kept our economy safe for so many years were eliminated – and why. Article II will explain whose wealth has increased dramatically as a result of the change. For part two click below.

Click here for part -----> 2,

� 2008 - Marilyn Barnewall - All Rights Reserved

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Marilyn Barnewall received her graduate degree in Banking from the University of Colorado Graduate School of Business in 1978. She created the first wealth creation (credit-driven) private bank in America in the 1970s. Prior to her 21-year banking career, she was a newspaper reporter, advertising copywriter, public relations director, magazine editor, assistant to the publisher, singer, dog trainer, and an insurance salesperson and manager.

She was named one of America's top 100 businesswomen in the book, What It Takes (Dolphin/Doubleday; Gardenswartz and Roe) and was one of the founders of the Committee of 200, the official organization of America's top 200 businesswomen. She can be found in Who's Who in America (2005-08), Who's Who of American Women (2006-08), Who's Who in Finance and Business (2006-08), and Who's Who in the World (2008). She can be reached at:









McFadden accused the Federal Reserve of swindling the U.S. Treasury, of conspiring with their foreign principals (central banks in other nations) and others to defraud the American government. Thus, the charges I would make against the Federal Reserve in 2008 were first made in 1932 by a U.S. Congressman.