The Federal Reserve Act of 1913, which created the Federal Reserve System, expressly states that Congress reserves the right to “amend, alter or repeal” this legislation at any time. Why is that reservation clause there? Every American should be aware of its existence. They should be able to repeat Section 30 of the Federal Reserve Act in the same way they would know how to sing “Happy Birthday”, because in a sense it’s almost as joyous a provision. But why is it there? Its very peculiar when you think about it because you don’t see that, generally, in statutes passed by Congress or by State legislatures. Why? Because it is never considered likely that Congress will lose its authority to repeal any statute without expressly reserving the right to do so. How would that happen? Could one Congress write a provision that said, “This statute cannot be repealed?” Of course not. One Congress cannot bind another Congress. The Constitution certainly is one thing that’s fixed and it certainly does not provide for statutes that cannot be repealed or amended. So why is Section 30 of the Federal Reserve Act there? The reason is, the Federal Reserve is largely made up, perhaps totally made up of, private parties. All twelve Federal Regional Banks are private entities, and there have been court decisions dealing with such matters. Also, the banks in the lower part of the pyramid—the commercial banks (e.g., Bank of America, Wachovia), the various State banks (that is, chartered in the states), are private banks. These are all private banks, the entire system is private.
The Federal Reserve Act, Section 30
The Federal Reserve Act, Section 30
- Problem encountered when drafting the Federal Reserve Act—’Vested Rights’
The problem Congress had, or the draftsmen had (i.e., the people who drafted the Federal Reserve Act) was that they recognized this potential problem of “vested rights”. The reasoning being “We [Congress] are giving a lot of rights and privileges to these private entities. And if we don’t put a provision in the Federal Reserve Act reserving the right in Congress to change this statute, as we will, these private entities could come along later, if we try to change it, and claim that those rights are ‘vested rights’ – that this a contract between Congress and these private entities and we can’t change that in midstream.” And that was a doctrine and still is a doctrine that came out of the Supreme Court:
Vested Rights – Dartmouth College vs Woodward (1819)
There was a case called the “Dartmouth College Case” which involved a contract between the State of New Hampshire and Dartmouth College. The State tried to change this “charter”, as it was referred to. The case went to the Supreme Court, which said, ”No, this is a contract and you can’t change this now. But what you can do in the future, when you draft such a document, is put in a provision reserving your right as a legislator to change it. Because there might be public policy considerations that would advise you to change it.” This can be done in a particular charter or as what has happened subsequently, you will find in many State codes a general provision that reads, “We reserve the right to change any corporate charter in the future.” This reservation clause provides for the retention of this power.
- What does this reservation clause mean to the Federal Reserve?
What does the reservation clause in the Federal Reserve Act mean to the Federal Reserve? It means they have essentially an “I owe you nothing” deal with Congress. Congress can take everything away from them tomorrow. They Federal Reserve has no claim to anything—zero. If you think about their position, they’re really walking on glass. The only argument they have is the argument of panic and terror and destruction of the country’s economic and social system. Because if they don’t get what they want, the whole thing will collapse and we’ll all be in the soup together. But the Federal Reserve certainly has no legal argument to stand on.
It would be in the bank’s interest to move as fast as possible on a new international currency, like the proposed “Amero”. This is because when the Banks control an international currency coupled with the proposed “North American Union”, they are out from the jurisdiction of Congress. And whatever that new bank is that they create, will be sure not write one of those reversionary-powers clauses in its charter.