Need help on Federal Reserve Regions as additional levers

[BushSpeak]

A couple years ago when I was studying up on Paul Warburg and the Jekyll Island crowd and the creation of the Federal Reserve, I remember reading about how Federal Reserve Regions were used as additional levers to inject/withdraw fiat money into the system.

Since I haven't been able to find any mention of this again, I am asking you for some help one way or the other.

The theory goes like this:

With the Fractional Reserve Banking system, banks can create loans up to 9 times their reserves as virtual/fiat money.

When the FED creates new (fiat money), they can then loan 9 times the amount to the regional banks, which in turn counts this as reserves and loans 9 times that amount to local banks, which in turn counts this as reserves and loans 9 times that amount to the people (who in turn spend the money on a house for example so the builders will then deposit the money in the bank which can then be re-loaned 9 times etc...).

This principal gives the FED tremendous leverage (9x9x9...) to inject fiat money into the system in times of expansion, but also to withdraw money in times of contraction.

This is what happened at the beginning of the depression, when the FED recalled part of their loans and sent local banks scrambling to recall their personal loans.

I would appreciate any help/links you can provide on this process, especially on the role of regional reserve banks as levers.

Living in France and trying to explain to people here how the fiat money system works.

Thanks in advance.

[dixiegrrrrl]

1. Worse yet, that figure of 9? It grew to something like 40.

There is stuff all over the net about this.

try googling what Ron Paul has been saying. Whatever else he spouts off about, he is right about the Federal Reserve.

did ja try this:

http://en.wikipedia.org/wiki/Money_creation


And it is my understanding the Fed Reserve is not acting at all according to how it was
"supposed" to act, perhaps that is why it is hard to find info.

[roamer65]

2. In the early days of the Fed, the district banks had much more autonomy.

The district system was used to confuse the American people as to what the Fed really was...a central bank. The "central bank" name was specifically avoided in the beginning. Eventually the battle for Fed control came down to two districts, B-2 (New York) and G-7 (Chicago). NY Fed President Benjamin Strong eventually won and the NY Fed basically became the master of the system.

On a side note, NY Fed president Benjamin Strong was a very close personal friend of Bank Of England chief Montagu Norman. With Norman, much of the groundwork was laid for the Great Depression in their dealings to manipulate the dollar-pound exchange rate in the 1920's, specifically the 1927 Fed easing to bolster the pound.

Strong was also one of the Jekyll Island bunch, btw.