Badlands Media - Badlands Book Club: The Creature From Jekyll Island - Chapter 3

Episode Date: May 15, 2026

CannCon and Ashe in America tackle Chapter 3 of G. Edward Griffin's The Creature from Jekyll Island, where the theoretical bailout playbook from Chapter 2 gets applied to real history. Penn Central, Lockheed, New York City, Chrysler, Commonwealth Bank of Detroit, First Pennsylvania Bank, and Continental Illinois all get walked through the same script: reckless loans, emotional blackmail to Congress, taxpayers absorb the losses, and the banks walk away whole. The FDIC gets exposed as a tiered system that quietly hands large banks a free ride on uninsured deposits paid for by smaller banks and the public. The duo also uncover significant content missing from the fifth edition compared to the third, including entire sections on the FDIC mechanics and the Unity Bank bailout, and ask the question everyone should be asking: why was it removed? Plus, CannCon drops the news that an interview with author G. Edward Griffin himself may be on the horizon.

The badlands, one of the badlands, explain those badlands. That's a hell of their name. Hey, guys, well, this is kind of a little bit awkward. Don't know where my co-host is. She was just in John's chat. She must have to be like, well, if John's not, if John's still going live, then I don't have to be live, right? So she'll be here in a minute, I'm sure.

In the meantime, welcome, everybody. to Badlands Book Club covering the creature from Jekyll Island, right? Yeah, G. Edward Griffin. And let me get squared away here. I tried to go to the last possible moment. I did not make it. Ash will be here momentarily, I'm sure. So in the meantime, let's go ahead and check out our sponsors for today's show.

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again that's badlands gold.com and okay so I just had to I had to send a text so we will see what's going on here. Did I start an hour early? No, it starts at two. Am I actually here early? No, I'm not here early. Now Spotzel's got me questioning myself. It is 2 p.m. I am right.

You guys are driving me crazy. Well, you not you guys, just Spotzel and. Ash. I'm making sure that I'm not going crazy. Hold on. Hold on. I see the dots. I'm being texted. I am here on time. I am always on time. Ash will be here momentarily. Okay. So, you know what? While we're waiting for her, let's just go ahead and let's do the deed, man. This is my favorite minute and 49 seconds of every show. Today we remember those who gave everything. and memory is never still we can't stop for sense

and we have to deliver all of these soft disclosure gift cards the go by Zach Cade the lotion detector getting over the beer bra oh there she is sorry

I was involved in a conversation and lost the moment the role of Alpha today we played by Ash you literally had me questioning everything I'm like, am I, am I really, really early? And then Spotel's like, yeah, you started the show at 2 p.m.

I was like, wait, that's what, that's what time the show starts, right? Yeah, no, it is. And I was all, I was all ready and everything set up and ready. I just, I just lost direct time while I was, I was involved, it was involved conversation. So that's okay. We will let that slide. It's not, it's not your modus operandi. It's not, it's not your normal thing to be late.

If you were alpha, I'd be giving you shit, but. We love that. I'm not going to do that. I'm not going to. We do it off. Of course we love Alpha. Oh, I like this. Green Star, if you're watching, do this. That sounds fun. Oh, dude. You could have fun with that one. We could have a lot of fun with that one. Yeah, that's cool. Good idea. F and awesome. That's an F and awesome idea. That's an awesome idea. All right. All part of the simulation, Kankon. There we go. It is a simulation.

I actually have some very cool news. Ash doesn't even know this yet. Ash doesn't even know this yet. So when we finish up with this book, I have an in to interview G. Edward Griffin. No way. Yes. Oh, fantastic. That's exciting. It was a very, it was a very cool circumstance. Somebody invited me to an event out in Vegas and he is going to be one of the speakers. And so I asked him. I said, do you have an end with him? And he said, oh, yeah, absolutely. And so we're covering his book on one of our shows on book club. And we would like to interview him. And so he's going to work on making that happen. It's somebody that we've had on why we vote a couple times. Ashkin figured out. Right on. That's cool. You know, it is, it is nice when the authors reach out and want to come on the show to discuss our analysis of their

books. But, you know, sometimes they don't show up. And so. To be fair, he didn't not show up. We didn't really push it with that previous author because, again, I was saying in John's chat, I honestly don't think he wrote that book. You were parted to the conversation. I don't think he wrote the book. Yeah. Well, I think the book is a CIA rewrite of the agency's operations in the region. And that's my, you know, we finished it.

I was a little nervous about that take before we. finish the book like are they going to bring this thing around and we're going to eat crow nope no there's nothing there's nothing all right so we ready to get into uh chapter three of the creature from jekyll island i'll bring it up on stage you guys can read along with us we are reading it because it's published all over the place and uh let's get into it um chapter three protectors of the public that's what we need. We need protectors. We need protectors. The game called bailout, as it actually has been applied to specific cases, including Penn Central, Lockheed, New York City, Chrysler, Commonwealth Bank of Detroit, First Pennsylvania Bank, Continental Illinois, and others. In the previous chapter, we offered the whimsical analogy of a sporting event to clarify the maneuvers of monetary and political scientists to bail out those commercial banks, which comprise the the Federal Reserve cartel. The danger in such an approach is that it could leave the impression the topic is frivolous. So let us abandon the analogy and turn to reality. Now that we have studied the hypothetical rules of the game, it is time to check the scorecard of the actual play itself. And it will become obvious that this is no trivial matter. A good place to start is with the rescue of a consortium of banks, which we're holding the endangered loans of Penn Central Railroad. Okay. Penn Central.

Penn Central was the nation's largest railroad with 96,000 employees and a weekly payroll of $20 million. In 1970, it became the nation's biggest bankruptcy. It was in debt to just about every bank willing to lend it money, including Chase Manhattan, Morgan Guarantee. Guarantee. Manufacturers Hanover, First National City. Chemical Bank, and Continental Illinois. Officers of those banks had been appointed to Penn Central's Board of Directors as a condition for obtaining funds, and they had acquired control over the railroads management. The banks also held large blocks of Penn Central stock in their trust departments.

Bankers sitting on the board of directors were privy to information long before the public received it that would affect the market price of Penn Central's stock. Chris Wells, in the last days of the club, describes what happened. Quote, on May 21st, a month before the railroad went under, David Bevin, Penn Central's chief financial officer, privately informed representative of the company's banking creditors that its financial condition was so weak, it would have to postpone an attempt to raise $100 million,

and desperately needed operating funds through a bond issue. Instead, said Bevan, the railroad would seek some kind of government loan guarantee. In other words, unless the railroad could manage a federal bailout, it would have to close down. The following day, Chase Manhattan's Trust Department sold 134,300 shares of its Penn Central holdings before May 28th. When the public was informed of the postponement of the bond issue, Chase sold another 120,000. 28,000 shares. David Rockefeller, the bank's chairman, vigorously denied Chase had acted on the basis of inside information. All right there for just one second. First and foremost, when you see a railroad at this time, you know, this is what year was this? 1970? 1970. Yeah. So 1970. And you look at Joe Biden always trying to bail out Amtrak. I thought that was interesting. But there was a different.

here, Ash, a pretty big difference. This is the biggest one I've seen so far. So the second paragraph under Penn Central, this edition says the arrangement was convenient in many ways, not the least of which was that the bankers sitting on the board of directors were privy to information. So that's a little different. Yours just starts with the bankers sitting on the board were purviewed. There's another difference as well in that little subheading where it says the game called bailout as it has. Mine just says the bailout game has applied in real life to Penn Central. Yeah, and there was there was one other one. The banks held a large block. No, that wasn't it. There was one other one that was pretty obvious and I'm not seeing it. Do you want me to read it from the from the no, no, no, no, no, no, read yours. I like to see the differences and point them out because it shows the, the progression of the book itself. Agreed.

And Setsl is asking if you can zoom in and make it bigger so that people can read along. Yeah, hold on. I have to take it off of this style. so that I can actually do it this way. I was just trying to make it look a little more professional without the title bar and everything above it. There's one more, I think it's where it says it gradually, in my book it says, yeah, right here it says,

and they gradually had acquired control over the railroads management. NIRS just said they acquired control. So that's the only difference there. Okay, keep on. Virtually all of the management decisions that led to Penn Central's demise were made by or with the concurrence of its board of directors, which is to say by the banks that provided the loans. The banks were not in trouble because of Penn Central's poor management. They were Penn Central's poor management.

An investigation conducted in 1972 by Congressman Wright Patman, Chairman of the House Banking and Currency Committee, revealed the following. banks provided large loans for disastrous expansion projects and then lent additional millions so the railroad could pay dividends to its stockholders. This created the false appearance of prosperity and inflated the price of its stock long enough to dump it on the unsuspecting public. Thus, the banker managers engineered a three-way bonanza for themselves. They, one, received dividends on worthless stock, two, earned interest on loans that funded those dividends, and three were able to unload 1.8 million shares of stock, after dividends, of course, at unrealistically high prices. The company's top executives disposed of their stock in the fashion at a personal gain of more than $1 million. Okay, pause.

Mine says reports from the Security and Exchange Commission showed that the company's top executives had disposed their stock. Interesting. In the $1 million. Oh, in that last line? Yeah, it adds. So they removed in your edition reports from this SEC. Yours is before mine? Yes.

Oh, interesting. You can keep going. Okay. The public be damned. No, no. You didn't read the head, the railroad. The last paragraph. Oh, you don't have that paragraph?

I don't have that paragraph. Oh, so here's a whole paragraph that's different. That's the most significant. This is the most significant change we had. Had the railroad? Now, keep in mind, this is the prior edition, so there might be a reason that this was taken out. So just keep that in mind as I read this. Had the railroad been allowed to go into bankruptcy at that point and been forced to sell off its assets,

the bankers still would have been protected. In any liquidation, debtors are paid off first, stockholders last. So the manipulators had dumped most of their stock while prices were relatively high. That is a common practice among corporate raiders who used borrowed funds to seize control of a company, bleed off its assets to other enterprises, which they, uh, which they afco control and then toss the debt ridden dying carcass upon the remaining stockholders or in this case, the taxpayers. So there's a little difference. The process.

All right. The public be damned. Yeah. It's interesting, sorry. It's interesting because I was thinking that mine was. I don't know. I don't know. I was thinking.

Yeah, but it's so mine is more recent and they removed that paragraph. That's weird. Why? I don't, I don't know. And I mean, I don't think anything, nothing in there is factually incorrect. Like when, when you go into bankruptcy, debtors are paid first, right? Yeah. And the stockholders would get paid last.

The manipulators had dumped most of their stock while prices were relatively high. So maybe that's the case. The, the allegation of insider trading. I hope he comes on the show so we can ask him. Yeah, that would be fantastic. In fact, let me highlight this just so that we know. Yeah, that's the most significant change we've seen so far. I'll highlight that section so that we know that there's something there.

Okay. The public be damned. In his letter of transmittal accompanying the staff report, Congressman Patman provided the summary. Quote, it was as though everyone was a part of a close-knit club in which Penn Central and its officers could obtain with very few questions. last, loans for almost everything they desired both for the company and for their own personal interest, where the bankers sitting on the board asked practically no questions as to what was going on, simply allowing management to destroy the company, to invest in questionable activities, and to engage in some cases in illegal activities. These banks in return obtained most of the

company's lucrative banking business. The attitude of everyone seemed to be, while the game was going on, that all these dealings were of benefit to every member. of the club and the railroad and the public be damned. The banking cartel commonly called the Federal Reserve System was created for exactly this kind of bailout. Arthur Burns, who is the Fed's chairman, would have preferred to provide a direct infusion of newly created money, but that was contrary to the rules at that time. In his own words, quote, everything fell through.

We couldn't lend it to them ourselves under the law. I worked on this thing in other ways, end quote. The company's cash crisis came to a head over. Stop, stop, stop. Highlight that whole paragraph. I don't have it. After the quote, I start with the company's crash. All right.

Interesting. The company's crash cash crisis came to a head over a weekend. And in order to avoid having the corruption forced to file for bankruptcy on Monday morning, Burns called the homes of the heads of the Federal Reserve Bank around the country and told them to get the word out immediately that the system was anxious to help. On Sunday, William Triber, who was the first. first vice president of the New York branch of the Fed, contacted the chief executives of the 10 largest banks in New York, and told them that the Fed's discount window would be wide open

in the next morning. Translated, that means the Federal Reserve System was prepared to create money out of nothing and then immediately loaned it to the commercial banks so they, in turn, could multiply and relend it to Penn Central and other corporations, such as Chrysler, which were in similar straits. Furthermore, the rates at which the Fed would make these funds available would be low enough to compensate for the risk. Speaking of what transpired on the following Monday, Burns boasted, quote, I kept the board in session practically all day to change regulation queue so that money could flow into CDs at the banks, end quote. Looking back at the event, Chris Wells approvingly describes it as, quote, what is common consent the Fed's finest hour? What is by

common consent the Fed's finest hour. Finest hour or not, the banks were not that interested in the proposition unless they could be assured that the taxpayer would co-sign the loans and guarantee payment. So the action inevitably shifted back to Congress. Penn Central's executives, bankers, and union representatives came in droves to explain how the railroad's continued existence was in the best interest of the public of the working man and of the economic system itself. The Navy Department spoke of protecting the nation's defense resources.

Congress, of course, could not callously ignore these pressing needs of the nation. It responded by ordering a retroactive 13% pay raise for all union employees. After having added that burden to the railroad's cash drain and putting it even deeper into the hole, it then passed the Emergency Rail Services Act of 1970, authorizing 125 million in federal loan guarantees. This is sounding a lot like 2008. The banks are too big to fail. We've got to bail out GMC or GM, Dodge, Mopar, whatever.

Yeah, well, they're explaining, remember, they're explaining how the game works. And so we would, I think, see if, you know, if their theory or assertion is correct, we would expect to see this same thing. repeat itself. That would be an excellent question to ask Mr. Griffin if he comes on. Like what besides the 2008, have there been other cases of this that we may have overlooked,

you know, more subtle and not, you know, the largest bailout in the history of the country like TARP and the 2008 crisis? This particular section of this book is really making me want to read Atlas Shrugged again. Interesting. It could be another book on the list. All right. None of this, of course, solved the basic problem, nor was it really intended to. Almost everyone knew that eventually the railroad would be nationalized, which is a euphemism for becoming a black hole into which tax dollars disappear.

This came to pass with the creation of Amtrak in 1971 and Conrail in 1973. Amtrak took over the passenger service of Penn Central. and Conrail assumed operation of its freight services, along with five other Eastern railroads. Conrail technically is a private corporation. When it was created, however, 85% of its stock was held by the government. The remainder was held by employees. Fortunately, the government's stock was sold in a public offering in 1987. Amtrak continues under political control and operates at a loss.

It is sustained by government subsidies, which is to say by taxpayers. In 1997, Congress dutifully gave another $5.7 billion, and by 1998, liabilities exceeded assets by an estimated $14 billion. Conrail, on the other hand, since it was returned to the private sector, has experienced an impressive turnaround and has been running at a profit, paying taxes instead of consuming them. Okay, my numbers are different. Amtrak continues under political control and operates at a loss. By 1998, Congress had given it $21 billion. By 2002, it was consuming more than $200 million of taxes per year. By 2005, it requested an increase in subsidy to $1.8 billion a year.

Between 1990 and 2009, it had lost another $23 billion. Wow. So way worse. Yeah. Way worse. I mean, more information comes to light, right? So update, maybe. Yeah.

Lockheed. In 1970, the Lockheed Corporation, the nation's largest defense contractor, was facing bankruptcy. And you might highlight that paragraph with the numbers. So we can ask that question. I mean, that's kind of, yeah, to me, that's more like, you know, the numbers got clarified, but we can definitely. related. The Bank of America and several smaller banks had lent 400 million to the Goliath, and it did not want to lose the bountiful income that flowed from that. So they joined forces with Lockheed's management, stockholders, and labor unions, and descended on Washington.

Sympathetic politicians were told that if Lockheed were allowed to fail, 31,000 jobs would be lost, hundreds of subcontractors would go down, thousands of suppliers would be forced into bankruptcy and national security would be seriously jeopardized. What the company needed was to borrow more money and lots of it, but because of its current financial predicament, no one was willing to lend. A bailout plan was quickly engineered by Treasury Secretary John B. Connolly that guaranteed payment on an additional $250 million in loans, an amount that would put Lockheed 60% deeper into the debt hole than it had been before. But that made no difference now. Once the taxpayer had been made a co-signer to the account, banks had no qualms about advancing the funds.

The government now had a powerful motivation to make sure Lockheed would be awarded as many defense contracts as possible, and they would be as profitable as possible. This was an indirect method of paying off the banks with tax dollars, but doing so in such a way as to not arouse public indignation, and other defense contractors, which had operated more efficiently, would lose business, but that, could not be proven. Furthermore, a slight increase in defense expenditures would hardly be noticed. Is that the last paragraph? Because we have a whole other paragraph. By 1977, Lockheed had indeed paid back this loan. And that fact was widely advertised as proof of the

wisdom and skill of all the players, including the referee and the game commissioner. A deeper analysis, however, must include two facts. First, there's no evidence that Lockheed's operation became more cost efficient during these years. And second, every bit of money used to pay back the loans came from the defense contracts, which were awarded by the same government which was guaranteeing those loans. Under such an arrangement, it makes little difference if the loans were paid back or not. Taxpayers were doomed to pay the bill either way. It's weird that that would be taken out.

Yeah, it is. New York City, although the government, of New York City is not a corporation in the usual sense. It functions as one in many respects, particularly regarding debt. I don't have that paragraph. Mine starts within 1975. Okay. In 1975, New York had reached the end of its credit rope and was unable even to make payroll. The cause was not mysterious. New York had long been a welfare state within itself, and success in city politics was traditionally achieved by lavish promises of benefits and subsidies for the quote-unquote poor. Not surprisingly, the city also was notorious for political corruption

and bureaucratic fraud, whereas the average large city employed 31 people per 1,000 residents, New York had 49. That's an excess of 48%. These salaries of the employees far outstripped those in private industry. While an x-ray technician in a private hospital earned $187 per week, a porter working for the city earned 203. The average bank teller earned $154 per week, but a change maker on the city subway received $212. And municipal fringe benefits were fully twice as generous as those in private industry within the state.

On top of this mountainous overhead were heaped additional costs for free college educations, subsidized housing, free medical care, and endless varieties of welfare programs. City taxes were greatly inadequate to cover the cost of this utopia. Even after transfer payments from Albany and Washington added state and federal taxes to the take, the outflow continued to exceed the inflow. There were now only three options, increase the city taxes, reduce expenses, or go into debt. The choice was never in serious doubt. By 1975, New York had floated so many bonds. It had saturated the market and could

find no more lenders. Two billion dollars of this debt was held by a small group of bankers, dominated by Chase Manhattan and City Corp. When the payments of interest on these loans finally came to a halt, it was time for serious action. The bankers and the city fathers traveled down the coast to Washington and put their case before Congress. The largest city in the world could not be allowed to go bankrupt, they said. Essential services would be halted and millions of people would be without garbage removal, without transportation, even without police protection. Starvation, disease, and crime would run rampant through the city.

It would be a disgrace to America. David Rockefeller at Chase Manhattan persuaded his friend Helmut Schmidt, Chancellor of West Germany, to make a statement to the media that the disastrous situation in New York could trigger an international financial crisis. Congress, understandably, did not want to turn New York into a zone of anarchy, nor to disgrace America, nor to trigger a worldwide financial panic. So in December of 1975, it passed a bill, authorizing the Treasury to make direct loans to the city of up to $2.3 billion, an amount which would be more than double the size of its current debt to the banks.

Interest payments on the old debt resumed immediately. All of this money, of course, would first have to be borrowed by Congress, which was itself deeply in debt. And most of it would be created directly or indirectly by the Federal Reserve System. That money would be taken from the taxpayer through the loss of purchasing power. called inflation, but at least the banks could be repaid, which is the object of the game. There were several restrictions attached to this loan, including Ari austerity program, Ari austerity program. Do you have that in there? Ari? So this whole end of this part is different for me. Oh.

So I have, it's mine's much shorter. So I'll just read you what mine says. So we have New York could trigger an international financial crisis that line up there. The end of this section for me reads, Congress did not want to bring anarchy to New York, nor to disgrace America, nor to trigger a worldwide financial panic. So in December of 1975, it passed a bill authorizing the Treasury to make direct loans to the city of up to 2.3 billion, an amount which would more than double the size of its current debt to the banks. Interest payments on the old debt resumed immediately,

which is the object of the game, New York City has continued to be a welfare utopia, and it is unlikely that it will ever get out of debt. And then I go to Chrysler. So that's it. That's a big difference. There were several restrictions attached this loan, including austerity programs and a systematic repayment schedule.

None of these conditions was honored. New York City has continued to be a welfare utopia, and it is unlikely it will ever get out of debt. All right. Yeah. Crazy. Chrysler By 1978, the Chrysler Corporation was on the verge of bankruptcy.

It had rolled over its debt many times and that phase of the game was nearing an end. It was not interested in borrowing just enough to pay interest on its existing loans. To make the game worth playing, it wanted over a billion dollars in new capital. Managers, bankers, and union leaders found common cause in Washington. If one of the largest corporations in America was allowed to fold, think of the hardship to thousands of employees and their families. Consider the damage to the economy as shockwaves of unemployment move across the country. Tremble at the thought of lost competition in the automobile market if there were only two major brands from which to choose instead of three. Okay, pause there, because this entire thing is different for me.

The entire three paragraphs. So this version says by 1978, Chrysler was on the verge of bankruptcy. It rolled over its debt to the banks many times and the game was nearing an end. In spite of an OPEC oil embargo, which had pushed up the cost of gasoline, and in spite of the increasing popularity of small automobile imports, the company had continued to build a traditional gas hog. It was now saddled with a mammoth inventory of unsaleable cars with a staggering debt which it acquired to build those cars.

The timing was doubly bad. America was also experiencing high interest rates, which coupled with the fears of U.S. military involvement in Cambodia had led to a slump in the stock market. Banks felt the credit crunch keenly. And in one of those rare instances of modern history, the moneymakers themselves were scouring for money. Chrysler needed additional cash to same business. It was not interested in borrowing just enough to pay the interest on its existing loans. To make the game worth paying, it wanted over a billion dollars in new capital. But in the prevailing economic environment, the banks were hard pressed to create anything close to that kind of money. Managers, bankers. I have the next paragraph I have. Okay. That's what I thought. I haven't gotten there for you.

Okay. Keep going. And someone asked, are they two different additions? Yes. And we've now turned this into comparing and contrasting them because the stuff that's different and missing is actually pretty interesting. Managers,

bankers and union leaders found common cause in Washington. One of the largest corporations in America. Oh, we did that. We read that, right? Yeah, just keep going for continuity. Think of the hardship to the thousands of employees and their families. Consider the damage to the economy as a shockwaves of unemployment move across the country, tremble at the thought of lost competition in the automobile market if there are only two major brands from which to choose instead of three.

Could anyone blame Congress for not wanting to plunge innocent families into poverty, nor to upend the national economy, nor to deny anyone their constitutional right to freedom of choice. So a bill was passed, directing the Treasury to guarantee up to $1.5 billion in new loans to Chrysler. The banks agreed to write down $600 million of their own loans and to exchange an additional $700 million for preferred stock. Both of these moves were advertised as evidence that the banks were taking a terrible loss, but were willing to yield so in order to save the nation.

It should be noted, however, that the value of the stock which was exchanged for previously uncollected debt rose drastically after the settlement was announced to the public. Furthermore, not only did interest payments resume on the balance of those old loans, but the banks now replaced the written down portion with fresh loans, and these were far superior in quality because they were fully guaranteed by the taxpayers. That's where I end. So valuable was this guarantee that Chrysler, in spite of its previously poor debt performance, was able to obtain loans at 10.35% interest. While its more solving competitor, Ford had to pay 13.5%.

Applying the difference of 3.15% to $1.5 billion with a declining balance continuing for only six years produces a savings in excess of $165 million. That is a modest estimate of the size of the federal substance. The real value was far greater because without it, the corporation would have ceased to exist, and the banks would have taken a loss of almost their entire loan exposure. Crazy. Wow. I mean, I wonder if... I'm wondering if there was like defamation or something and they had to educate it. Or was there a change in publisher?

Did somebody take over the book and was there a censorship? You know, did, in other words, did Griffin lose editorial discretion over the book and somebody decided to take these parts out? Because these are, I mean, they seem to be. Their factual assertions. They're factual assertions, exactly. And so that's a little bit concerning. Either the research was incorrect or somebody deliberately took this out of the book. Yeah.

Well, no, I think definitely somebody deliberately took it out of the book, the reason, underlying reason. And it still could be, you know, I don't know. As for the substance, this is maddening. But when you consider that the banks won't issue the loans because the solvency isn't there and they don't expect it to be successful, but then the federal, they give a bunch of emotional propaganda, emotional fear porn, emotional blackmail to the public that your neighbors are going to go, you know, factories are going to close and all of these horrible.

things are going to happen. And by the way, all that stuff happened anyway. But not before they took, you know, $2.3 billion or whatever. It's maddening. One second. Okay. All right. Federal deposit. Oh, F dick. Oh, I don't have this whole section. Really? I have Commonwealth Bank of Detroit next. F dick. I don't have F dick at all, actually. You're not getting any F dick. That's what she said. It will be recalled from the previous chapter that the F. Dick is not a true insurance program,

and because it has been politicized, it embodies the principle of moral hazard, and it actually increases the likelihood that bank failures will occur. The F. Dick has three options when bailing out an insolvent bank. The first is called a payoff. It involves simply paying off the insured depositors and then letting the bank fall to the mercy of the liquidators. This is the option usually chosen for small banks, no political clout. The second possibility is called a sell-off, and it involves making arrangements for a larger bank to assume all the real assets and liabilities of the failing bank. Banking services

are uninterrupted, and aside from a change in name, most customers are unaware of the transaction. The option is generally selected for small and medium banks. In both a payoff and a sell-off, the F-Dick takes over the bad loans of the failed bank and supplies the money to pay back the insured depositors. The third option is called a bailout, and this is the one which deserves our special attention. Irvine Sprague, or Spray, a former director of the FDIC explains, quote, in a bailout, the bank does not close, and everyone insured or not is fully protected. Such privileged treatment is accorded by FDIC or FDIC, only rarely to an elect few. End quote. That's right. He said everyone insured or not is fully protected.

The bank, which comprise the banks which comprise the elect few, generally are the large ones. It is the only number of dollars at risk becomes, it is only when the number of dollars at risk becomes mind-numbing that a bailout can be camouflaged as protection of the public. Spray says, quote, the FDI Act gives the F-DIC board sole discretion to prevent a bank from failing at

whatever cost. The board needs to make, the finding that the insured bank is in danger of failing, and quote, is essential to provide adequate banking service in its community, end quote. F-DIC boards have been reluctant to make an essentially find, to make an essentiality finding unless they perceive a clear and present danger to the nation's financial system, end quote. Favoritism towards the large banks is obvious at many levels. One of them is the fact that in a bailout, the F-Dick covers all deposits, whether insured or not. That is significant because the bank pays an assessment based only on their insured deposits.

So if uninsured deposits are covered, also the coverage is free, more precisely paid by someone else. What deposits are uninsured? Those in excess of $100,000 and those held outside the United States. Wow. Which banks hold the vast majority of such deposits? The large ones, of course, particularly those with extensive overseas operations. The bottom line is the large banks get a whooping free ride when they are bailed out. Their uninsured accounts are paid by FDIC and the cost of that benefit is passed to the smaller banks and the taxpayers. This is not an oversight. Part of the plan at Jekyll Island was to give a competitive edge to the large banks.

Man, if this, Ash, if this was selectively taken out. Yeah, I don't have that. I also don't have Unity Bank next scroll down I want to see what else is there Commonwealth Bank of Detroit so I have what's your next chapter Commonwealth Bank of Detroit is the next one I have so those two so I'll read Unity Bank just here off of the screen well well I mean hang on again I do want to reiterate that this was taken out so it could have been taken out because there are factual inequities here like wrong things being said here. So keep that in mind until we clarify why these were taken out. Because again, if somebody took over publishing on this book and decided, hey, we need to get our hands on this. Let's take this stuff out. Because that's pretty damning what they're saying about the F-Dick right there. Yeah. I wonder if, I mean, I think you should maybe reach out and see if you can get clarification on the updates, because maybe then we just read the updated version if it is like defamatory or something. Hold on. Did

Edward, I'm going to look it up on the machine real quick, so bear with, did Edward, why don't I start, while you're looking that up, why don't I read Unity Bank, but I am going to need you to scroll. The first application of the FDIC, FDIC essentiality rule was in fact an exception. In 1971, Unity Bank and Trust Company in the Roxbury, Roxbury section of Boston, found itself hopelessly insolvent, and the federal agency moved in. This is what was found. Unity's capital was depleted. Most of its loans were bad.

Its loan collection practices were weak, and its personnel represented the worst of two worlds, over staffing and inexperience. The examiners reported that there were two persons for every job, and neither one had been taught the job. With only $11.4 million on its books, the bank was small by current standards. Normally, the depositors would have been paid back,

and the stockholders like the owners of any other failed business venture would have lost their investment. As Sprague himself admitted, quote, if market discipline means anything, stockholders should be wiped out when a bank fails. Our assistance would have the side effect of keeping stockholders alive at government expense. But Unity Bank was different. It was located in a black neighborhood and was minority owned, as is often the case when government agencies are given discretionary power, powers, decisions are determined more by political pressures than by logic or merit, and unity was a perfect example.

In 1971, the specter of rioting in the black communities still haunted the halls of Congress. Would the FDIC allow this bank to fail and assume the responsibility, the awesome responsibility for new riots and bloodshed? Sprague answers, quote, neither while, another director nor I had any troubling view. trouble viewing the problem in its broader social context. We were willing to look for a creative solution, my vote to make the essentially finding and thus save the little bank was probably for ordained an inevitable legacy of Watts. The Watts riots ultimately triggered the essentiality doctrine. On July 22nd, 1971, the FDIC declared that the continued operation of Unity Bank was indeed essential and authorized a direct infusion of $1.5 million.

Although appearing on the agency's ledger as a loan, no one really expected repayment. In 1976, in spite of the F. Dick's own staff report that the bank's operations continued, quote, as slipshod and haphazard as ever, the agency rolled over the loan for another five years. Operations did not improve, and on June 30, 1982, the Massachusetts Banking, commissioner finally revoked Unity's charter. There were no riots in the streets, and the FDIC quietly wrote off the sum of $4,463,000 as the final cost of the bailout. Okay, so I got some clarity, and I asked the machine, did G. Edward Griffin give an explanation for the revisions in the creature? It says, yes, Griffin has said that some material in the book

was, quote, unquote, cleaned out, or revised because he went back to original sources and found that certain earlier accounts were more dramatic than the evidence supported while still preserving what he saw as the essential story. That suggests the revisions were not presented as a change in his core thesis, but as an effort to remove embellishment and sharpen the historical account. The available material I found does not show a single formal public statement from Griffin listing every revision and explaining each one in detail. So the best answer is he did give an explanation, but it appears to be a general one about source checking and removing overstayed material rather than a line-by-line justification for specific revisions. Interesting. And as we talked about the day we started this book, there have been 51 printings of the book. There are five editions of the book.

I'm reading the fifth. I think you're reading the first. Is that right? No, I think this is the third. The third. So the third was May 1998. The fifth edition was 2010 September. So that's the one that I have.

So I have the most up to date version. This is a second look at the Federal Reserve. So maybe this is a second edition. No, it's the same. Oh. It should say, pull that back up. Now scroll down to the bottom. Oh, okay.

So mine says fifth edition like right here. You don't have that. second third edition third edition so about how many how many years apart did I say I think it was like 197 1997 versus 1998 to 2010 so 12 years there you go what page are we on 62 I'm on page 47 first Pennsylvania bank right Commonwealth Bank of Detroit okay there we go yeah so I mean again like the the FDIC section, I could see, I could see the Unity Bank maybe being taken out if, you know, he found that the facts were incorrect on that. But the, the FDIC part, I don't know why that was

taken out because that's, I mean, that's. And I checked through the end of the chapter. It was not somebody in the chat said maybe they rearranged it is not in this chapter at all. The FDick or the unity bank, they've both been taken out. Okay. Commonwealth Bank of Detroit. The bailout of the Unity Bank of Boston was the exception to the rule that small banks are indispensable while the giants must be saved at all cost from the point forward. However, the FDick game plan was strictly according to to Hoyle. The next bailout occurred in 1972 involving the $1.5 billion bank of the Commonwealth of Detroit. Commonwealth had funded most of its phenomenal growth through loans from another bank, Chase Manhattan in New York. When Commonwealth went belly up,

largely due to security speculation and self-dealing on the part of its management, Chase sees 39% of its common stock and actually took control of the bank in an attempt to find a way to get its money back. F. Dick, Director, Spray describes the inevitable sequel. Chase officers, there's a quote, quote, Chase officers suggested that Commonwealth was a public interest problem that the government agencies should resolve. That unsubtle hint was the way that Chase phrased its request for bailout by the government. their proposal would come down to bailing out the shareholders, the largest of which was Chase, end quote. The bankers argued that Commonwealth must not be allowed to fold because it provided, quote, unquote, essential banking services to the community. That was justified on two counts.

One, it served minority neighborhoods. And two, there were not enough other banks in the city to absorb its operation without creating an unhealthy concentration of banking power in the hands of a few. A little late for that. it was unclear what the minority issue had to do with it in as much as every neighborhood in which Commonwealth had a branch was served by other banks as well. Furthermore, if Commonwealth were to be liquidated, many of those branches undoubtedly would have been purchased by competitors and service to the communities would have continued. Judging by the absence of attention given to this issue during discussions, it is apparent that it was merely thrown in for good measure and no one took it

Very seriously. It's like the introduction to DEI right there. Why are you closing your bank? It's in a minority neighborhood. Yeah, but there's other banks there. But we're in a minority neighborhood. Okay. In any event, the F. Dick did not want to be accused of being indifferent to the needs of

Detroit's minorities, and it certainly did not want to be a destroyer of free enterprise competition. So in January 17, 1972, Commonwealth was bailed out with a $60 million loan plus numerous federal guarantees. Chase absorbed some losses primarily as a result of Commonwealth's weak bond portfolio, but those were minor compared to what would have been lost without F. Dick intervention. Since continuation of the bank was necessary to prevent concentration of financial power, F. Dick engineered its sale to the first Arabian corporation,

a Luxembourg firm funded by Saudi princes. Better to have financial power concentrated in Saudi Arabia than in Detroit. The bank continued to flounder, and in 1983, what was left, of it was resold to the former Detroit Bank and Trust Company, now called Comerica. Thus, the dreaded concentration of local power was realized after all, but not until Chase Manhattan was able to walk away from the deal with most of its losses covered. First Pennsylvania Bank. The 1980 bailout of First Pennsylvania Bank of Philadelphia was next.

With assets in excess of $9 billion, it was six times the size of Commonwealth. It was also the nation's oldest bank dating back to the Bank of North America, which was created by the Continental Congress in 1781. The bank had experienced rapid growth and handsome profits due to the aggressive leadership of its CEO, John Bunting, formerly an economist with the Federal Reserve. He was the epitome of the Ares Goggo bankers. He vastly increased earnings by reducing safety margins, making risky loans, and speculating in the bond market. As long as the economy expanded, these gambles were profitable. When the bond market turned sour, however, the bank plunged into a negative cash flow. By 1979, First Penn was forced to sell off several of its profitable subsidiaries to obtain operating funds,

and it was carrying $328 million in bad loans. That was $16 million more than the total investment from stockholders. The time had arrived to hit up taxpayer for the loss. The bankers went to Washington to present their case, not only was the bailout of first pen essential for the continuation of banking services in Philadelphia, it was also critical to the preservation of world economic stability. The bank was so large, they said, if it were allowed to fail, it would act as the first domino leading to an international financial crisis.

Sprague recalls, quote, there was strong pressure from the beginning not to let the bank fail. Besides hearing from the bank itself, the other large banks and the comptroller, the controller, we heard frequently from the Fed. I recall at one session, Fred Schultz, the Fed Deputy Chairman, argued in an ever-rising voice that there were no alternatives. We had to save the bank. He said, quit wasting time talking about anything else.

Never let a crisis go to waste. The time for debate is over. Wait, we haven't started debate yet. No, we have to save the bank. Yeah, there was a lot of differences in those paragraphs. right there. Yeah, I think we just capture them and unless you find something significantly material as I'm reading. The directors of the FDIC did not want to cross story. Wait, wait, you have a whole paragraph missing from the quote. Yeah, I have a subject missing time talking about anything else is the last part of my quote. Yeah, it says the Fed's role as lender of last resort first generated contention between the Fed and FDIC during this period. The Fed was lending heavily to First Pennsylvania fully secured and Fed chairman.

and Paul Volker said he planned to continue funding indefinitely until we could work out a merger or a bailout to save the bank. Okay, keep going. The directors of the Aptych did not want to cross swords with the Federal Reserve System, and they most assuredly did not want to be blamed for tumbling the entire world economic system by allowing the first domino to fall. So, in due course, a bailout package was put together, which featured 325 million, 8,000,000. a $325 million loan from the EFDIC interest free for the first year and at a subsidized rate thereafter, about half the market rate. That's all I have. So I can keep going off of here.

Several other banks, which were financially tied to First Penn and which would have suffered great losses if it had folded, loaned an additional $175 million and offered a $1 billion line of credit. EFDIC insisted on this move to demonstrate that the banking industry itself was helping and that it had faith in the venture. To bolster that faith, the Federal Reserve opened its discount window, offering low-interest funds for that purpose. The outcome of this particular bailout was somewhat happier than with others, the others, at least as far as the bank is concerned. At the end of the five-year taxpayer subsidy, the F. Dick loan was fully repaid. The bank has remained on shaky ground, however and the final page of this episode has not yet been written.

Man, I, I, I am very much curious to go over some of these things. I don't know, I mean, that was 20 years ago. I don't know how much he'd remember. He's what, 94 now, G. Edward Griffin. I don't know. That's amazing though. I hope we can, I hope we can talk to him about it. Time check on this, because there's probably another hour left in this chapter.

I would say we get through Continental Illinois. and then at the first the world's first electronic bank run kind of he's he's laid out all the players and then he gets into it so I would say we pause after this next section and pick it up next week this is a long chapter yeah it's really long when I was looking to see if unity bank in here I was like oh man this just keeps going okay so we're on where continental Illinois so read that one and then we'll stop for the week continental Illinois everything up to this point was but mere practice for the big event which was yet to come. In the early 1980s, Chicago Continental Illinois was the nation's seventh largest bank, with assets of 42 billion and with 12,000 employees

working in offices in almost every major country around the world, its loan portfolio had undergone spectacular growth. Its net income on loans had literally doubled in just five years, and by 1981 had rocketed to an annual figure of $200,000. $154 million. It had become the darling of the market analyst and even had been named by Dunn's review as one of the five best managed companies in the country. These opinion leaders failed to perceive that the spectacular performance was due not to an expertise in banking or investment, but to the financing of shaky business enterprises and foreign governments, which could not obtain loans anywhere else. But the public didn't know that and wanded it in on the action. For a while,

the bank's common stock actually sold it a premium over others, which were more prudently managed. The gaudy fabric began to unravel during the 4th of July weekend of 1982 with the failure of the Penn Square Bank in Oklahoma. That was the notorious shopping center bank that had booked a billion dollars in oil and gas loans and resold them to Continental just before the collapse of the energy market. Other loans had began to sour at the same time. The Mexican and Argentine debt crisis was coming to a head in a series of major corporate bankruptcies, were receiving almost daily headlines. Continental had placed large chunks of its easy money with all of them. When these events caused the bank's credit rating to drop,

cautious depositors began to withdraw their funds and new funding dwindled to a trickle. The bank became desperate for cash to meet its daily expenses. In an effort to attract new money, it began to offer unrealistically high rates of interest on its own CDs. Loan officers were sent to scour the European and Japanese markets to conduct a public relations campaign aimed at convincing market managers that the bank was calm and steady. David Taylor, the bank's chairman at the time, said, quote, we had the Continental Illinois Reassurance Brigade, and we fanned out all over the world, end quote.

In the fantasy land of modern finance, glitter is often more important than substance, image more valuable than reality. The bank paid the usual quarterly dividend in August in spite of the fact that this intensified its cash crunch. As with the Penn Central Railroad 12 years earlier, that move was calculated to project an image of business as usual prosperity, and the ploy worked, for a while at least. By November, the public's confidence had been restored and the bank's stock received, recovered to its pre-Pen Square level.

By March of 1983, it had risen even higher, but the worst was yet to come. Copy that paragraph, highlight that paragraph because it's missing. My minus starts by the end of 1983. Okay. I'm an OCD when it comes to that, by the way. Clearly. I have to get every single letter. You should see me in the morning when I'm prepping daily.

Like, I will, if I highlight something else, I usually get over that because it's taking you longer. It's like I'll highlight something. And if it goes one space beyond the letter. I feel like what we need to do is when we're on shows together, I need to start highlighting things in a very non-OCD way to break. of this and like all of my colors mean things to me like yeah all the different colors like all have a different meaning that i know in my head yeah it's it's crazy uh by the end of 1983 the bank's

burden of non-performing loans had reached unbearable proportions and was growing at an alarming rate by 1984 it was 2.7 billion that same year the bank sold off its profitable credit card operation to make up for the loss of income and to obtain money for paying stockholders their expected quarterly dividend. The internal structure was near collapse, but the external facade continued to look like business as usual. The first crack in the facade appeared at 1139 a.m. on Tuesday, May 8th. Reuters, the British News Agency, moved a story on its wire service stating that the banks in the Netherlands, West Germany, Switzerland, and Japan had increased their interest rate on loans to continental and that some of them had begun to withdraw their funds. The story also quoted

the bank's official statement that rumors of pending bankruptcy were totally preposterous. Within hours, another wire, the commodity news service reported a second rumor that a Japanese bank was interested in buying continental. Mine ends at preposterous. Where's preposterous? Right. You were just there. The within hours another wire. The last sentence is missing from my book. That's it. Okay. All right. Now you know my, my highlighting thing. Yeah. I don't a lot of OCD things. That's probably one of the eraser. You just pulled out the eraser on your highlights. That is some OCD highlighting, Brian. I did. I erased it. And like I will, I will erase. Yeah, I'm bad. The only other thing I do that's really OCD is when I eat a sandwich, I never eat the part that

my fingers are touching. Like if I'm eating, yeah. Do not wash your hands before you eat the sandwich? Well, I think I got that from the Marine Corps and from working for my dad. when you couldn't do it. And now it just like sticks with me. So but like if I use the wrapper as a hand thing, I'll eat the whole thing. So I think it is a psychological thing with me. Yeah. Yeah.

There you go. I mean, just wash your hands. You're not in the wretched desert anymore. You can wash your hands before you eat now, Brian. The things that stick with you. It's very strange. All right. Well, smash that thumbs up.

If you guys have not done so, we appreciate you guys all being here, even though some were here on time somewhere so we're a little late it's it's i knew you're i knew you were going to bring that back around oh of course you'll never you'll never live that down i'm not going to give you too much shit for it but you'll never live that down it's fine uh we do not have any uh boost or uh uh rants do we have any boost i haven't been checking those oh i possibly for processing yeah did we hit all of our ads did i did i was killing time waiting for you to figure out that it was time to go live or yeah yeah he's not going to give me too too much shit about it uh we did actually have one from may 10 yeah good uh from a jc 25 dollars thank you so much

thank you as you ashen can appreciate you we appreciate you as well and if you're watching this show on replay badlands boost is a great way to support us it's also the way that gives us i think the greatest percentage of your tip to us. Platform, you know, takes the smallest amount through that channel. Badlandsmedia.tv slash boost. You can select the show Badlands Book Club and leave a message and we'll read it on the show next week. We certainly do appreciate that.

Also, Rumble rants are a great way, but it didn't look like we have any of those today. So that's it is what it is. Please hit the like button, as Brian said. But also, if you're watching on Rumble, please drop into the Rumble. Rumble chat really quickly and just say hi or drop a period or some sort of note so that we have you have to pull that back up because I missed it so that we have we get we get your unique chatter metric it's a metric on the Rumble platform that helps us out we certainly do appreciate it you could tell us your life story if you want but you could also just drop a period and that

would be cool too so thanks everyone when you were talking about tips I feel like there was a make sure that the FDick doesn't get those tips right Exactly. Exactly, because the reason that, like, if you, if you're on an iPhone and you give a Rumble rant, there's like a portion that's taken by iPhone, there's a portion that's through Apple Pay specifically. There's a portion that's taken by Apple Pay. There's a portion that's taken by the platform. There's like, if you give a dollar, Brian and I get like, I think, 18 cents a piece. Something like that. Something crazy. Yeah. Yeah. Yeah.

All right, guys. Thank you all so much for tuning in. And we will see you guys. I will see me and alpha will see you tonight at 9 p.m. We've got Davis Yance joining us to talk about COVID and the military and the hearing and all, all the fun stuff. So we'll see you guys. Are you doing your date night? Yes, yes. Christy and I will be doing our date night on Friday night at 7 p.m. That's on my channel, rumble.com slash cancon.

We're just search canccon, CANN, C-A-N-F. Fat Chance, last minute rant says, BTF always supports you. Thank you so much. BTF, Badlandia Task Force, I think, is what he's referring to. Yes, I would assume. Yeah, we love you guys. And I can't wait to see everybody in Deadwood who's going to be in Deadwood. Did we talk about Deadwood? You probably talked about Deadwood while I wasn't here. No, we did not actually. So let's talk about Deadwood real quick. It's the place where Fat Chance got engaged. I know. It's got so many special memories for us in our Badlands community.

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