In order to evade the usury laws which had prevented the growth of a funded system of national insurance, governments had frequently resorted to the issue of annuities and child endowments as a means of raising funds. The tontine was a somewhat later development, having been put into operation in France during the year 1689. It took its name from that of its originator, Lorenzo Tonti, a Neapolitan by birth, who was attracted to Paris by the regime of Mazarin. In its original form the tontine was a loan, "In which the premium was never to be repaid, but the entire interest on the loan was to be divided each year among the survivors or the original subscribers."
The chief characteristic, and trademark, of tontine is that the pool of assets is divided among the survivors, at the options of those subscribers who dropped out, or did not survive until the time for distribution had arrived. It was a wagering policy, just like that of the George Rapp Society. The Equitable Life Insurance Company, in 1868, introduced the deferred dividend system, which was really an application of the tontine principle. The most serious flaw in the deferred dividend system was the inability of the insured to compel an accounting.The general rule is that the policy holder is not entitled to compel the company to account for dividends. Nor can the policyholder "compel the distribution of the surplus fund in other manner or at any time, or in any other amounts than that provided for in the contract."
As stated in the report of the Armstrong Committee, "the plan of deferring dividends for long periods...has undoubtedly facilitated large accumulations, providing apparently abundant means for doubtful uses on the one hand, while concealing on the other the burden imposed upon the policy holders..." According to George L. Armhein, Instructor in Insurance at the University of Pennsylvania, " ...deferred dividends were prohibited by law in the legislation (Pa.) of 1906 and subsequent years. Thus came to an end a system which in 1898 had superseded to a very large extent that of annual dividends, and which in 1915 seemed antiquated.">
Question: What made it "antiquated" in 1915? According to Mr. Armhein, it was outlawed in 1906, but didn't seem antiquated until 1915! John K. Tarbox, The commissioner of Insurance the State of Massachusetts had this to say about tontine in his annual report: "The false idea of life insurance as investment begat the equally false conception of life insurance as a bet, and the latter gave birth to the modern tontine, which is a wager."
"...In the tontine the forfeitures go to enrich the individual survivors of the special class of policy holders who enter the compact, constituting a company liability instead of a company asset, for the protection of its policy obligations... The stake played for, rather than the game itself, constitutes the chief offense. Our law condemns, forbids, and makes void the contract of forfeiture." "As was truly testified before the committee of the New York Assembly, in 1877, ... the tontine policy is taken for purposes of investment by a set of men who would not insure their lives at all. The inducement to the investment is...the expected profits from forfeitures..."
"Aside from the moral quality of the matter, --concerning which I waive controversy, -- the considerations which the public aspect seems to me principally to invite are these; First, whether it is prudent to make of our insurance companies great banking establishments,...and, second, whether an institution organized as the life insurance system was, for a benevolent and unselfish use, shall be combined with enterprises of elfish speculation as the tontine undeniably is."I am strongly persuaded of the implicitly and positive danger of magnifying the banking feature of life insurance institutions, to accommodate modern plans of tontine speculation and endowment investment.
John Tarbox was clearly saying that, at that time, there were modern plans to make insurance companies (specifically, tontine insurance companies) great banking institutions.
The tontine had been declared unlawful in several states and these people knew that they had to do something to protect their money. They brought over the son of one of the big banking families from Europe, Paul Warburg, from the House of Warburg, which dates back to the Hanseatic League of merchants.
And, it was he (Paul Warburg) who sold the American public on creating a Federal Reserve Bank, so that there wouldn't be any more panics and depressions, that they would be able to even out the economy by control of the money supply. By this one Act, the American people lost their independence. It, in fact, was the opposite of the British surrender at Yorktown. Giving control of our credit and money supply to a private banking organization, by the name of the Federal Reserve, was the surrender of our independence.
Congress passed the Federal Reserve Act on December 23, 1913 wherein it made Federal Reserve Notes debt obligations to the United States, and authorized the Federal Reserve to be the issuers of these debt obligations. The Federal Reserve Act also stipulated that the interest on the debt (to the Federal Reserve as a maritime lender to the United States) was to be paid in gold. No provision was made in the Act for paying off the principle. There was also a proviso that the people had 20 years to challenge the Act ...
NOTE: 1. Under the law of Nations, an action on Quo Warranto can be brought within 20 years. Quo Warranto, in this case, would be an action in the Court of Admiralty demanding "By whose Authority", and proof of that authority, the Act was implemented.
2. "Public policy" is part and parcel of the Law of Nations. The Act was never challenged in a court of proper jurisdiction (admiralty), probably because anyone who wanted, or tried, to challenge it didn't know how.
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