I don't know that when they put together the Fed[eral Reserve System] that there were any evil purposes there. The actual Federal Reserve, the initial mission was nothing like what the Federal Reserve is doing today. Federal Reserve notes were 40% backed by gold, they were backed 100% by commercial paper. Treasury securities - U.S. government bonds - it was illegal for the Federal Reserve to buy any U.S. government debt.

They were there to provide an elastic money supply that would expand when the economy expanded and contract during periods of contraction. The Federal Reserve is doing none of the functions it was originally designed to do. It's politicians, over the years, that changed their mission and their structure to turn the Federal Reserve into the engine of inflation. But its original purpose was not that bad... and I might've even been in favor of the Federal Reserve based on what it was supposed to do.

But the problem was, of course, and what our Founders knew - when they didn't want any National Bank, is because they didn't trust it. They knew that no matter how benevolent the original purpose, that politicians couldn't resist corrupting it, and that ultimately it would destroy the economy. And our Founding Fathers feared bankers more than they feared standing armies. And they always thought that if the United States fell, it would not be from a foreign power, but from within... from massive inflation... from bureaucrats and bankers - that would be the undoing of our nation. And it shows how brilliant these men were over 200-years ago.

I don't think that banks need to keep 100% reserves. But I think we need a free-market in banking. I think bankers need make a determination what type of reserves they want to keep to maintain their business. But I don't think we should have deposit insurance, that is a main problem. The minute you have deposit insurance, then you have to regulate the banks, because the deposit insurance basically says that the banks can do whatever they want because no one cares about their risk.

So it is because of the deposit insurance that we have to regulate the banks. If we didn't guarantee deposits, then the markets would regulate the banks. Customers would regulate the banks. But unfortunately, the government intercedes... they try to insulate everybody from risk.. as a result, we have reckless risk-taking on the part of the banks. If the government didn't subsidize bank accounts. If government didn't insure deposits, bankers would be a lot more prudent. Bankers wouldn't be taking all this risk, becaues if they did, they wouldn't get any deposits, depositors aren't stupid!

The reason that Americans don't care what about their bank does is because there is an FDIC insurance. But if there was no insurance, they would care, they would do research. People do research before they buy plasma TV. The do research before they buy a car. They test drive, they look at consumer reports, they do all sorts of things.

But they open up a bank account, put 100,000 dollars in there, they don't do any research at all. Whatever the closest bank is, they open up an account: they don't care. No one looks at their loan portfolios. And it's all because of the government.