Origins of the FEDERAL RESERVE Part I and other observations...

Part I

George Washington had two influences on his administration: Alexander Hamilton and Thomas Jefferson. While Thomas Jefferson tended to look out for the interests of the common man, Alexander Hamilton was more of an elitist. Thomas Jefferson envisioned a nation of farmers and plantation owners. Alexander Hamilton wanted to build the United States into a powerful nation. Hamilton understood the desperate importance of financial stability, especially during the fledgling years of the early United States.

The United States was a debtor nation (sound familiar)..and owed a considerable amount of money to our European Allies from the American Revolution including France and Spain. To make matters worse, many American had floated the United States loans (in the form of bonds) during the Revolution. Hamilton understood the importance of servicing that debt if the United States were to maintain any type of credit. (Being a financial deadbeat back then was much worse than it is now...heck they even had debtors prisons back then!)

Many bond holders had become weary of the impending financial calamity facing the United States. A good number of the bond holders sold off to a group of speculators. Hamilton formulated a plan that would allow the United States to pay the speculators and our European creditors too. He spoke at great length to George Washington, and his supporters in Congress insisting that a Bank of the United States be created. Jefferson appealed to both Hamilton and Washington that this was an abuse of government authority. However Hamilton cited the "Elastic Clause" in the U.S. Constitution as a means to create such a bank.

States in the North rolled their war debts into a national debt that all states would be responsible for servicing. Europeans would receive payments on the debts that we owed them, and most importantly the speculators became a wealthy class of financiers centered in New York City.

Other observations:
Now that the cat is out of the bag, it appears that Paulson's idea of creating a more forceful and observant Federal Reserve was well-received by the financiers on Wall Street. As the CEO of Wells Fargo commented. The plan while not perfect creates a Fed that will become a partnership with the financial industry... I am concerned that tax payer monies are being spent to bail out those that should have suffered the consequences of Darwin's Natural Selection. Instead it appears that we are heading into more of a corporate welfare state...

Stock Plays:
I purchased a July(ITM) PUT on WGO @17.5. Unless gasoline drops down to 1.00 expect a tight consumer, baby boomers who are putting off retirement, and a glut of people who will not drive their Winnebagos anywhere.