Who is responsible—directly, morally and legally responsible—for this orgy of Federal Reserve extravagance absolutely unequaled in the history of the world or in the history of banking? Why, the Federal Reserve Board at Washington is responsible. What makes them responsible? Here is the exact language. Read it. "Any compensation that may be provided by Boards of Directors of Federal Reserve Banks for directors, officers or employees shall be subject to the approval of the Federal Reserve Board." That's plain, isn't it? If the Federal Reserve Board at Washington doesn't "approve" these huge compensations, they can not be paid. It is the Federal Reserve Board at Washington—and no other authority on earth—which is responsible for the greatest orgy of expense ever strapped on the backs of staggering business. It's their ukase, it's their decree, it's their order which registers these titanic expenses—every penny of which is wrung from American producers of wealth! And they are political appointees—not elected, but appointed. The Federal Reserve Board at Washington really wields a power greater than any sceptered monarch ever swayed. At their nod or at their beck every Federal Reserve employee holds his job, for if they don't "approve" his "compensation" he can't attach his lips to the public teat with its golden flow of "compensation!" It's the Federal Reserve Board at Washington—unsupervised and with legally limitless power—which is responsible for this Federal Reserve expense orgy.
WHAT THE MONSTER DOES WITH ITS LOOT
HIS chapter is going to be like a tack—short but pointed. Federal Reserve apologists—on and off the floor of Congress—when driven into their last retreat always take their final stand and make their last play in the "franchise tax" stronghold. Their assertion is in effect that no matter what may be the abuses and sandbaggeries and extravagances of this system the "big money" gets back to the Government in the shape of the mythical "franchise tax." Here is where you get the facts precisely as they are. What became of the lootage of the Federal Reserve System for the year 1921 and what proportion of it did your Government get?
The gross takings of the Federal Reserve System—extracted from American production and industry—amounted to $122,864,605. That's what it euphoniously calls its "earnings." First there came out the gigantic expense account, of which you have already read, of $36,066,065, leaving $86,798,540, which the monster calls its "current net earnings." There is then added to this $360,856, which in previous years had been deducted for "depreciation on U.S. Bonds," which didn't finally "depreciate." There is also added $131,536 under an "all other" blanket—much favored in the Federal Reserve System vocabulary. You now have $87,290,932 "current net earnings." From this are deducted $1,251,675 for "depreciation allowance on bank premises;" $2,861,500 for "reserve for possible losses" which probably won't occur; $400,000 "reserve for self insurance"—whatever that is; $49,295 "reserve for depreciation on U.S. Bonds"—which probably won't depreciate now that they have been sandbagged out of the hands of the original purchasers; $641,237 sandbagged out under the favorite "all other" Federal Reserve blanket. Here are $5,203,707 gone out in mere bookkeeping entries with the real money which these entries represent still in Federal Reserve custody. This leaves $82,087,225. From this is deducted a petty $6,119,673 dividends paid on the capital commandeered. From this is deducted $15,993,086 to be added to the already swollen Federal Reserve Surplus Account. And there is left just $59,974,466 for the much touted franchise tax.
If you have followed these figures you have seen that in order to get a petty "franchise tax" of $59,974,466 into the hands of your Government, it cost you just exactly $62,890,139 to collect it—the precise difference between the Federal Reserve "earnings" and the amount paid into the Government. Ask yourself, is a tax of $59,974,466, which costs $62,896,139 to collect a "painless tax?" Is there any more painful tax levied on American industry? That's what this ballyhooed "franchise tax" amounted to in 1921 and all it amounted to—a tax of $59,974,466, which cost $62,890,139 to collect!