Tim Geithner vs. The American Banking Elite

By Simon Johnson

There comes a time in every economic crisis or, more specifically, in every struggle to recover from a crisis, when someone steps up to the podium to promise the policies that - they say - will deliver you back to growth. The person has political support, a strong track record, and every incentive to enter the history books. But one nagging question remains.

Can this person, your new economic strategist, really break with the vested elites that got you into this much trouble? The form of these vested interests, of course, varies substantially across situations, but they are always still strong, despite the downward spiral which they did so much to bring about. And fully escaping the grip of crisis really means breaking their power.

Not only is this a standard way of thinking about crisis resolution in many developing and post-communist countries, it also turns out to be a good guide to thinking about the US today. We have a powerful banking industry that has mismanaged its way into deep trouble. Yet these banks obtained an initial bailout - the Troubled Asset Relief Program, or TARP - on generous terms, and have consistently failed to use the opportunity provided by this government support to turn their operations around. Not only that, but they have flaunted their power - and their arrogance - through paying themselves large and largely inappropriate bonuses.

We come now, this week, to the podium. And Treasury Secretary Tim Geithner takes the stand (on Tuesday), to tell us how he proposes to use the remainder of the TARP funds, support from the Federal Reserve, and other policies to turn around the financial system and pull us out of recession. We previously posed relevant technical questions for this week; answers (or lack of answers) to these should determine if Geithner’s approach is likely to succeed. Think of that as a framework for reasonable technocratic assessment. But there is also the key political dimension to emphasize.

The elites who run the US banking industry have had a great run of economic good fortune. They used this wealth to further strengthen their political power, both through donations to politicians of almost all stripes and more broadly through taking positions of formal and informal influence throughout the executive and legislative branches.

Our unsustainable debt-fueled boom, in other words, produced both the conditions for a major global financial disaster, and a political strengthening of the people who benefited most from the risk-taking and associated compensation packages that made this disaster possible. Ending the financial crisis is relatively straightforward - a forced recapitalization and change of ownership/management in the banking system - although this will not immediately lead to an economic recovery (more on that here). But seen in deeper political terms, decisive action to restructure large banks is almost impossible. Such action would require overcoming perhaps the single strongest interest group in the United States today.

How can you do it? The answer must be by splitting this powerful interest group into competing factions, and taking them on one by one. Can this be done? Definitely, yes. In particular, bank recapitalization - if implemented right - can use private equity interests against the powerful large bank insiders. Then you need to force the new private equity owners of banks to break them up so they are no longer too big to fail. And then… there is always more to do to contain the power of a lobby that is boosted by any boom and which, the more it succeeds, the more likely it is to ruin us all.

(Note: this is also a guest post at http://www.growthcommissionblog.org/; if you’d like the World Bank potentially to take note of your comments, please post there as well as here.)

Comments

[Jason Rines...:]

The real debate is two fold:

1) What happens when a country outsources it's money supply to foreign interests. Is usery a long-term profitable model? That debate is now 3,000+ years old.

2) Does the citizenship have enough energy and angst to focus this on removing corrupt members of the House of Representatives as they did in the U.S. other three depressionary era's?

Feb 09 10:07 AM

[Steve in Gr...:]

This article and its comments reflect the deep confusion about who is responsible for the current recession. Until we get a clear understanding of the causes, there will be no fixes.

Read Professor John Taylor's article in today's WSJ. The title is "How Government Created The Financial Crisis". Quoting from the article "...Monetary excesses were the main cause of the boom. The Fed held its target interest rate, especially in 2003-2005, well below know monetary guidelines that say what good policy should be..."

Easy money, monetary inflation was the cause of the boom which created the bubble which began to burst in 2007. Alan Greenspan is responsible for the current crisis, period. Ben Bernanke and Barack Obama are working diligently on the next one.

Feb 09 10:19 AM

[Andy Singh:]

Blame. Blame. Blame. There are many parties and reasons for the current economic downturn. It's not what happened that matters, but how we get out of the current mess and ensure we have the right controls in place to avoid repeating the same mistakes in the future.

Feb 09 10:36 AM

[bkdc:]

"If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their Fathers conquered...I believe that banking institutions are more dangerous to our liberties than standing armies... The issuing power should be taken from the banks and restored to the people, to whom it properly belongs." - Thomas Jefferson

Feb 09 10:54 AM

[Consider_this:]

There's enough blame to go around, but nobody wants to blame themselves!

The banksters don't want to accept that they've created a compensation structure and mortgage environment that only seeks to drive maximum sales volume with no regard for quality or safety.

The homebuyers don't want to admit that they're part and parcel of the mentality that "houses never go down", "buy now or forever be priced out", "you're throwing money away by renting" and downright GREED by imagining to themselves that their "equity" is "building" and their houses will get them to riches one day

(cite: Shows like "Flip that house", fascination with Donald Trump's real estate empire, obsession about home values and homeowner associations; *ANIMOSITY* towards any blogs, articles or economists that even suggest that this is a ponzi scheme back in 2006, 2007... heck even NOW! Pure unbridled anger and hate at anyone who suggests that home will go down in price, or should go down FASTER.)

Try talking to an EXISTING home owner and suggest that the solution to our crisis is to WRITE DOWN home prices FASTER (not slower, as what the giovt and everyone wants to do); Accelerate foreclosures; and accelerate REO backlog on the bank's books.

The appraisers, who were supposed to defend integrity; but for who? For owners? Nope, they want to get as high an appraisal as possible so they can REFI or get a loan ASAP. For banks or mortgage brokers? Nope, they just want their next bonus and don't really hold the final mortgage paper anyway.

The securities rating agencies? Who pays their bills? The companies who have security to rate! So guess how can they bite the hand that feeds them?

The government? State and Federal? Who gets the most money from property tax -- who has a vested interest in making property values go up double digit every year? How many state workers wants property tax to go down, so they cannot get their "god given" benefits? Who gets the most political contribution from NAR, MBA or other home related retail companies every year? How many politician didn't have a Realtor, builder, banker or broker background or side business?

Anyone who invested in stock market is willing to come forth and say: "Gee, the gains I got the last few years are all frothy, please take back some of the gains, I'll relinquish it willingly"??? Nobody, a lot of people is looking to dump their overpriced stock on the next great fool who is willing to buy it from them at ever higher price. Anyone who's in the REIT / MBS bonds / CDS complain their yields must be too high to make sense and "let stop the madness" while they're raking in ever growing sums of interest?!?!

Look into the mirror for the blame everyone. You're it.

The anger and indignant response is only a reflection of the final realization that in the whole ponzi scheme, *You're the last fool*.

Feb 09 11:03 AM

[Harry Tuttle:]

History is not on our side. Geithner (and Summers) are part of the same system they are supposed to reform. I am afraid that, like their Japanese counterparts before them, they are not capable of making the tough decisions we need and will cling to a gradual approach instead. Unfortunately, the economic forces will reassert themselves as they did in Japan. In addition, since the problem is now global, we will not have the luxury of "muddle through by exports."

By the way, it doesn't matter who is to blame. Many banks are insolvent under any scenario that excludes selling their assets at par.

Feb 09 11:03 AM

[klarsolo:]

Consider_this, fantastic comment and mirrors exactly my sentiment. There are a lot of parties to blame, not just banks. But what needs to be done right now is not the blaming, but the cleaning up. And when that is done we need a complete overhaul of the incentive structure of the entire business.

Feb 09 11:07 AM

[Consider_this:]

Exactly, to try to "prevent the collapse" or "prevent the depression: is already starting off with the wrong foot.

If anyone in the govt a true hero, he'll realize that all actions have a time delay, that we're already past any actionable time to "prevent" any of that.

Instead, the fight now is to ACCELERATE the crash which also ACCELERATES the recovery schedule, so we don't lose a decade or two!

Prevent / Stop loss will drag things on, maybe even for centuries (I hope not!!!!) such that if you count the opportunity cost of time lost, and the actual loss when amortized over time -- the final loss is actually much higher.

Take steps to accelerate things down to find equilibrium. Markets will recover much faster than you think that way.

1. Nationalize the banks; write everything down, all securities and REOs, in steps, until they sell.
2. Outlaw new CDS; plan a death schedule over time for all existing CDSs.
3. Accelerate bankruptcy and foreclosure schedule. Legislate a "quick foreclosure" process. Shorten the time for non-viable homes to hit the resales list.
4. Instead of 15,000 tax credit to buy a home; reverse it! Make it a 30,000 tax credit to foreclose a home / dispose your debt, make it stock (must be acquired pre 2008) and time limited (i.e. have to clear in 1 year).
5. Accelerate corporate bankruptcy, but strengthen worker's protection for the bankruptcy.
6. REWARD SAVERS! *INCREASE* interest rate to reflect higher need for savings capital and risk levels. Increase FDIC insurance! People will save if you make the math make sense for them! Right now with pathetic interest rate, no wonder people put money in mattresses! (And then the govt / economists wonder why nobody has confidence!)

How likely is any of these being done? None.

On Feb 09 11:03 AM Harry Tuttle wrote:

> History is not on our side. Geithner (and Summers) are part of the
> same system they are supposed to reform. I am afraid that, like their
> Japanese counterparts before them, they are not capable of making
> the tough decisions we need and will cling to a gradual approach
> instead.

Feb 09 11:27 AM

[gemonk21:]

Maybe it is all going as planned. Maybe that banking elite wants you to play "the blame game" while they loot you. Maybe America isn't a poor pitiful giant but rather a grand experiment run by social engineers who know exactly what they are doing (looting), who can eliminate the middle class who can oppose them only by keeping them distracted a little while longer.

Maybe the elites are rewriting the rules as we speak - remember, the entire fractional reserve system (or any economic structure, for that matter) is at root an idea not a physical reality. Maybe some clever someone is working on a grander scale than we imagine, and is doing it very well. Just maybe...

Feb 09 11:29 AM

[Lex Luz:]

Just to dip back into it, I'll say this: it's utterly true that we are all responsible for the current mess - even those of us who managed our finances well have participated in the ways that we have. Did some people have their hands on longer levers, and push us deeper into the hole? No question that they did. Also, no longer relevant.

Others have said it and it is true: all that matters now is cleaning up the mess.

Cleaning up the mess means FORCING transparency, accuracy, and trust. That means that things will absolutely get worse before they get better, because many banks that are "too big to fail" will have to fail. The pain that comes from this will be agonizing.

As we all know, it isn't going to happen. The reason is that the people who would most feel the pain of the real and sustainable solution coming to pass are the people who are in power in government, banking, and industry. I don't care if you are a Democrat or a Republican; if you are in Congress or in other Elected or senior-most appointed office, you are part of a criminal enterprise that depends entirely on continuing to transfer wealth from future generations to a tiny number of elite individuals and institutions.

The solution BEGINS with the American people rising up to destroy the criminal enterprise. We can do that through the ballot box, though it certainly has become difficult. Eventually, the current system will fail, and the result of that will be violence. Throughout history economic collapses of this magnitude have always ended in war, and this one will too... UNLESS we reclaim the power of representative government and throw the criminals out of office.

First, though, we have to WAKE UP.

Feb 09 11:31 AM

[Whitehawk:]

Geithner has padded special interests ever since the BSC bailout early last year. NY Fed money to AIG, C, etc. to save CDS counterparty trades at GS and other associates. This is massive corruption in the banking system. Geithner has never been called to answer for this and it is shocking. When will the media and the public wake up?

Feb 09 12:08 PM

[John Lounsbury:]

Excellent article.

I see three statements that are worth repeating:

"Ending the financial crisis is relatively straightforward - a forced recapitalization and change of ownership/management in the banking system."

"But seen in deeper political terms, decisive action to restructure large banks is almost impossible. Such action would require overcoming perhaps the single strongest interest group in the United States today."

"The answer must be by splitting this powerful interest group into competing factions, and taking them on one by one. Can this be done? Definitely, yes. In particular, bank recapitalization - if implemented right - can use private equity interests against the powerful large bank insiders. Then you need to force the new private equity owners of banks to break them up so they are no longer too big to fail. And then… there is always more to do to contain the power of a lobby that is boosted by any boom and which, the more it succeeds, the more likely it is to ruin us all."

These are three forward looking gems in this post.

consider_this - - -

I especially appreciate your statement: "Pure unbridled anger and hate at anyone who suggests that home will go down in price, or should go down FASTER."

I agree that one necessary condition for stabilizing the financial system is establishing stable house prices that have the historic ratio of price to income. Delaying reaching those prices will delay the restructuring of the financial behemoths which are now dragging us down.

Feb 09 12:23 PM

[gemonk21:]

"The answer must be by splitting this powerful interest group into competing factions, and taking them on one by one. Can this be done? Definitely, yes. In particular, bank recapitalization - if implemented right - can use private equity interests against the powerful large bank insiders. Then you need to force the new private equity owners of banks to break them up so they are no longer too big to fail. And then… there is always more to do to contain the power of a lobby that is boosted by any boom and which, the more it succeeds, the more likely it is to ruin us all."

An interesting concept, but how does it work? The banks are recapitalizing using fiat printed by the fed quite literally out of thin air.

Does it make sense mathematically that the failure of 5% or so of the mortgages in America should lead to a global meltdown?

Feb 09 01:15 PM

[Jane:]

Every day I see another ad, or a "news" article that's really an ad packaged as news, that says the housing bubble didn't touch THIS area, and "It's a Great Time to Buy a Home!" Nevermind that foreclosures are way up, people are being laid off, and houses are still overpriced compared to what people can really afford! And nevermind that a national problem affects all areas!

Of course, such ads/"articles" are from the housing industry. They pay a lot of money to the media to run this tripe, and therefore the media glosses over the problem. For years there were warnings that the housing market was turning into a kind of Ponzi Scheme that could cause severe damage when it collapsed. And yet for those years the media ran the industry hype and ignored consumers who begged them to cover mortgage fraud, etc. Why did they go to the media? Because law enforcement told them it was "civil." And they could not pursue the cases in civil court most of the time because suing is impractical and unaffordable, and/or they were prohibited from suing by an arbitration clause.

While I can't excuse the media for ignoring it, I REALLY can't excuse the govt from continuing to look the other way when the FBI told them the same thing--this will take out the economy and it's the industry that's doing it. And I can't excuse govt agencies that let big companies off the hook for lending law violations by paying fines.

The home buyers were in some cases wannabe investors, not really people caught up in sometimes unrealistic dreams. Of those buyers not in that category you basically have two types; those who were complicit in loan fraud, and those who were victims of loan fraud. I could get behind a bailout for victims of fraud. That amount of money would barely be felt by taxpayers and would actualy do some good, but the govt needs to go after the crooks, not just pay for their damage. I can't get behind a rescue plan for anyone else, especially the industry. The industry created this problem, and the amount of money the industry's demanding is obscene, and will probably bankrupt the country. A heck of a legacy to leave to the next generation.

Feb 09 06:12 PM

[mediapro:]

Go take a look at the foreclosure communities such as west Memphis and other predominantly black and minority communities across the country. The red dots on the other side of the tracks indicate a kind of reverse red-lining we have never seen before the advent of mortgagae backed securities and credit default swaps to protect the buyers of those securities.

Many of these unsophisticated buyers were thrust into sub-prime instruments even when bankers and mortgage brokers could qualify them for traditional loans because they knew that there was a ready market in Freddie and Fannie to make a quick buck and escape the consequences of inevitable default if/when prices stopped appreciating.

Everyone in this financial scheme knew what they were doing. Many who saw their first opportunity at home ownership had no idea. After all, it was the same group in the banking industry who red-lined away entire neighborhoods.

Is everyone responsible to some extent? Of course. Should the financial pros own the weight of responsibility? OF COURSE!


On Feb 09 09:13 AM klarsolo wrote:

> It's sad how people keep bashing bankers as the apparently sole responsible
> culprit for this mess. You know who's really behind all this? All
> the people who borrowed too much money and now don't pay it back.
> Where are the articles that put responsibility on them as well? All
> I hear is about greedy banks, over and over again. It is getting
> boring.

Feb 10 03:46 PM

[monday1929:]

No, let's not whine. Let's take back trillions in stolen money from the banks and bankers from the past TEN years. Bonuses paid on fraudulent "profits" must be re-claimed by shareholders and taxpayers (formally known as citizens). THAT'S not whining, that's DOING.


On Feb 09 09:59 AM klarsolo wrote:

> Lex Luz, I agree with you that the finger pointing is not helpful.
> But yet, every day when I come to seekingalpha I see more finger
> pointing articles, and they all point towards the banks. I'm not
> saying the banks are innocent, not one bit. But neither was "the
> taxpayer". Not on average of course, because the average taxpayer
> probably did a good job with their personal finances. But once again
> a minority of irresponsible people at Wall AND Main Street created
> a mess for the majority.
> What we need are solutions, not more articles whining over the evil
> fat cats that got us into this mess.

Feb 11 08:27 AM

[monday1929:]

Good comments. You may not be aware that dozens of brave Real Estate appraisers went on record protesting the crimes they were witnessing and BEGGING the Govt. to crack down on delusional/corrupt appraials. Of course, thse appraisers were black-balled from the industry and their pleas were ignored by the same regulators who will now be given MORE power and money.When Americans are willing to die to see justice done, our "leaders" will shake in terror.


On Feb 09 06:12 PM Jane wrote:

> Every day I see another ad, or a "news" article that's really an
> ad packaged as news, that says the housing bubble didn't touch THIS
> area, and "It's a Great Time to Buy a Home!" Nevermind that foreclosures
> are way up, people are being laid off, and houses are still overpriced
> compared to what people can really afford! And nevermind that a national
> problem affects all areas!
>
> Of course, such ads/"articles" are from the housing industry. They
> pay a lot of money to the media to run this tripe, and therefore
> the media glosses over the problem. For years there were warnings
> that the housing market was turning into a kind of Ponzi Scheme that
> could cause severe damage when it collapsed. And yet for those years
> the media ran the industry hype and ignored consumers who begged
> them to cover mortgage fraud, etc. Why did they go to the media?
> Because law enforcement told them it was "civil." And they could
> not pursue the cases in civil court most of the time because suing
> is impractical and unaffordable, and/or they were prohibited from
> suing by an arbitration clause.
>
> While I can't excuse the media for ignoring it, I REALLY can't excuse
> the govt from continuing to look the other way when the FBI told
> them the same thing--this will take out the economy and it's the
> industry that's doing it. And I can't excuse govt agencies that let
> big companies off the hook for lending law violations by paying fines.
>
>
> The home buyers were in some cases wannabe investors, not really
> people caught up in sometimes unrealistic dreams. Of those buyers
> not in that category you basically have two types; those who were
> complicit in loan fraud, and those who were victims of loan fraud.
> I could get behind a bailout for victims of fraud. That amount of
> money would barely be felt by taxpayers and would actualy do some
> good, but the govt needs to go after the crooks, not just pay for
> their damage. I can't get behind a rescue plan for anyone else, especially
> the industry. The industry created this problem, and the amount of
> money the industry's demanding is obscene, and will probably bankrupt
> the country. A heck of a legacy to leave to the next generation.

Feb 11 08:34 AM

[antiquary:]

I hope if nothing else happens people will at least stop quacking about "elites." Calling 'em vested interests is fine. Apart from the root word being an adjective and not a noun, "elites" is jargon, and jargon is something used mainly by one of the demons of modern life-- activists who are essentially uninterested in thinking. Elites, fundies, tree-huggers-- all excuses to turn off your brain.

Feb 11 12:26 PM

[gemonk21:]

Antiquated - just for the heck of it, try fact-checking before you switch off the ole braineroo...

Elite
–noun 1. (often used with a plural verb) the choice or best of anything considered collectively, as of a group or class of persons.
2. (used with a plural verb) persons of the highest class: Only the elite were there.
3. a group of persons exercising the major share of authority or influence within a larger group: the power elite of a major political party.

the plural, elites, a noun, is also in the dictionary. Tree-huggers - now that's jargon.

On Feb 11 12:26 PM antiquary wrote:

> I hope if nothing else happens people will at least stop quacking
> about "elites." Calling 'em vested interests is fine. Apart from
> the root word being an adjective and not a noun, "elites" is jargon,
> and jargon is something used mainly by one of the demons of modern
> life-- activists who are essentially uninterested in thinking. Elites,
> fundies, tree-huggers-- all excuses to turn off your brain.

Feb 12 04:10 PM

[1776 We The...:]

IN CONGRESS, JULY 4, 1776
The unanimous Declaration of the thirteen united States of America

When in the Course of human events it becomes necessary for one people to dissolve the political bands which have connected them with another and to assume among the powers of the earth, the separate and equal station to which the Laws of Nature and of Nature's God entitle them, a decent respect to the opinions of mankind requires that they should declare the causes which impel them to the separation.

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. — That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, — That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness. Prudence, indeed, will dictate that Governments long established should not be changed for light and transient causes; and accordingly all experience hath shewn that mankind are more disposed to suffer, while evils are sufferable than to right themselves by abolishing the forms to which they are accustomed. But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security. — Such has been the patient sufferance of these Colonies; and such is now the necessity which constrains them to alter their former Systems of Government. The history of the present King of Great Britain is a history of repeated injuries and usurpations, all having in direct object the establishment of an absolute Tyranny over these States. To prove this, let Facts be submitted to a candid world.

He has refused his Assent to Laws, the most wholesome and necessary for the public good.

He has forbidden his Governors to pass Laws of immediate and pressing importance, unless suspended in their operation till his Assent should be obtained; and when so suspended, he has utterly neglected to attend to them.

He has refused to pass other Laws for the accommodation of large districts of people, unless those people would relinquish the right of Representation in the Legislature, a right inestimable to them and formidable to tyrants only.

He has called together legislative bodies at places unusual, uncomfortable, and distant from the depository of their Public Records, for the sole purpose of fatiguing them into compliance with his measures.

He has dissolved Representative Houses repeatedly, for opposing with manly firmness his invasions on the rights of the people.

He has refused for a long time, after such dissolutions, to cause others to be elected, whereby the Legislative Powers, incapable of Annihilation, have returned to the People at large for their exercise; the State remaining in the mean time exposed to all the dangers of invasion from without, and convulsions within.

He has endeavoured to prevent the population of these States; for that purpose obstructing the Laws for Naturalization of Foreigners; refusing to pass others to encourage their migrations hither, and raising the conditions of new Appropriations of Lands.

He has obstructed the Administration of Justice by refusing his Assent to Laws for establishing Judiciary Powers.

He has made Judges dependent on his Will alone for the tenure of their offices, and the amount and payment of their salaries.

He has erected a multitude of New Offices, and sent hither swarms of Officers to harass our people and eat out their substance.

He has kept among us, in times of peace, Standing Armies without the Consent of our legislatures.

He has affected to render the Military independent of and superior to the Civil Power.

He has combined with others to subject us to a jurisdiction foreign to our constitution, and unacknowledged by our laws; giving his Assent to their Acts of pretended Legislation:

For quartering large bodies of armed troops among us:

For protecting them, by a mock Trial from punishment for any Murders which they should commit on the Inhabitants of these States:

For cutting off our Trade with all parts of the world:

For imposing Taxes on us without our Consent:

For depriving us in many cases, of the benefit of Trial by Jury:

For transporting us beyond Seas to be tried for pretended offences:

For abolishing the free System of English Laws in a neighbouring Province, establishing therein an Arbitrary government, and enlarging its Boundaries so as to render it at once an example and fit instrument for introducing the same absolute rule into these Colonies

For taking away our Charters, abolishing our most valuable Laws and altering fundamentally the Forms of our Governments:

For suspending our own Legislatures, and declaring themselves invested with power to legislate for us in all cases whatsoever.

He has abdicated Government here, by declaring us out of his Protection and waging War against us.

He has plundered our seas, ravaged our coasts, burnt our towns, and destroyed the lives of our people.

He is at this time transporting large Armies of foreign Mercenaries to compleat the works of death, desolation, and tyranny, already begun with circumstances of Cruelty & Perfidy scarcely paralleled in the most barbarous ages, and totally unworthy the Head of a civilized nation.

He has constrained our fellow Citizens taken Captive on the high Seas to bear Arms against their Country, to become the executioners of their friends and Brethren, or to fall themselves by their Hands.

He has excited domestic insurrections amongst us, and has endeavoured to bring on the inhabitants of our frontiers, the merciless Indian Savages whose known rule of warfare, is an undistinguished destruction of all ages, sexes and conditions.

In every stage of these Oppressions We have Petitioned for Redress in the most humble terms: Our repeated Petitions have been answered only by repeated injury. A Prince, whose character is thus marked by every act which may define a Tyrant, is unfit to be the ruler of a free people.

Nor have We been wanting in attentions to our British brethren. We have warned them from time to time of attempts by their legislature to extend an unwarrantable jurisdiction over us. We have reminded them of the circumstances of our emigration and settlement here. We have appealed to their native justice and magnanimity, and we have conjured them by the ties of our common kindred to disavow these usurpations, which would inevitably interrupt our connections and correspondence. They too have been deaf to the voice of justice and of consanguinity. We must, therefore, acquiesce in the necessity, which denounces our Separation, and hold them, as we hold the rest of mankind, Enemies in War, in Peace Friends.

We, therefore, the Representatives of the united States of America, in General Congress, Assembled, appealing to the Supreme Judge of the world for the rectitude of our intentions, do, in the Name, and by Authority of the good People of these Colonies, solemnly publish and declare, That these united Colonies are, and of Right ought to be Free and Independent States, that they are Absolved from all Allegiance to the British Crown, and that all political connection between them and the State of Great Britain, is and ought to be totally dissolved; and that as Free and Independent States, they have full Power to levy War, conclude Peace, contract Alliances, establish Commerce, and to do all other Acts and Things which Independent States may of right do. — And for the support of this Declaration, with a firm reliance on the protection of Divine Providence, we mutually pledge to each other our Lives, our Fortunes, and our sacred Honor.

Apr 08 01:19 AM