Case sheds light on the Fed's status as a private institution
Below are excerpts from court cases demonstrating the standing of the Federal Reserve System. As you will see, the court ruled that the Federal Reserve Bank was an "independent, privately held and locally controlled corporation" and did not have sufficient "federal government control over 'detailed physical performance' and 'day-to-day operations'" Federal Reserve Banks see it as a federal agency:
Lewis v. United States, 680 F.2d 1239 (1982)
John L. Lewis, Plaintiff/Appellant,
United States of America, Defendant/Appellee.
United States Court of Appeals, Ninth Circuit.
Submitted March 2, 1982.
Decision of 19 April 1982.
Revised June 24, 1982.
Plaintiff filed a lawsuit claiming jurisdiction under the Federal Tort Claims Act for injuries sustained in a vehicle owned and operated by the Federal Reserve Bank. Judge David W. Williams, J. of the U.S. District Court for the Central District of California rejected the finding that the Federal Reserve Bank is not a federal agency within the meaning of the Act and that the court therefore lacks subject matter jurisdiction. Appeal. Appeals Court Circuit Judge Poole argued that, for the purposes of the Act, the Federal Reserve Bank is not a federal agency but an independent, privately owned and locally controlled corporation.
1. United States
There are no strict criteria for determining whether an entity is a federal agency within the meaning of the Federal Tort Claims Act, but the key factor is whether federal government control exists over the entity's "detailed physical properties" and "day-to-day operations." . . .
2. United States
For purposes of the Federal Tort Claims Act, the Federal Reserve Banks are not federal agencies but independent, privately owned and locally controlled corporations, since direct oversight and control over each bank is exercised by the Board of Directors, the Federal Reserve Bank, Although strictly regulated and locally controlled by its member banks, banks are neither classified as "wholly owned" government corporations nor as "mixed ownership" companies; the Federal Reserve Bank receives no appropriations from Congress, and banks have sue and be sued in their own name. . . .
3. United States
Under the Federal Tort Claims Act, federal liability is based solely on traditional agency principles, and does not necessarily exist when the tortfeasor is simply working for an entity, such as a Reserve Bank that performs essential activities for the government. . . .
For purposes of exemption from state taxes, the Reserve Bank is considered a federal agency.
5. National Taxation
The test to determine whether an entity is a federal agency for the purpose of avoiding state or local action or taxation is broad: whether the entity performs essential government functions.
Lafayette L. Blair, Compton, Cal., for plaintiff/appellant.
James R. Sullivan, Asst. us. Atty., Los Angeles, Cal., Defense of Defendant/Appellee; Andrea Sheridan Ordin, U.S. Army; Atty., Los Angeles, Cal., Profile.
Appeal from the U.S. District Court for the Central District of California.
Before Circuit Judges Poole and Boochever and District Judge Soloman. (The Honorable Gus J. Solomon, Senior District Judge for the District of Oregon, assigned seat)
Circuit Judge Poole:
On July 27, 1979, Appellant John Lewis was struck by a vehicle owned and operated by the Los Angeles Branch of the Federal Reserve Bank of San Francisco. Lewis filed the suit in district court, alleging that under the Federal Tort Act (Federal Tort Act), 28 U.S.C. sect. 1346(b). The United States filed a motion to dismiss on the grounds of lack of subject matter jurisdiction. The district court denied that request, holding that the Federal Reserve Bank is not a federal agency within the meaning of the Act and therefore the court lacks subject matter jurisdiction. We declare.
When enacting the Federal Tort Claims Act, Congress provided limited immunity from U.S. sovereign immunity against certain torts committed by federal employees. . . . Specifically, the act establishes liability for any employee of a federal agency for injuries "caused by negligence or misconduct or omission" while acting in the scope of his or her duties or work. . . . "Federal Agency" is defined as:
executive branch, military branch, independent
U.S. agencies and companies acting
Primarily as a U.S. tool, but not
Including any contractor with the United States.
28 American Code denominations. 2671. Accordingly, the liability of the United States for the negligence of a Federal Reserve Bank employee depends on whether the bank is a federal agency under section 1. 2671.
[1,2] There are no clear criteria for determining whether an entity is a federal agency within the meaning of the Act, but the key factor is the federal government's control over the "detailed physical properties" and "day-to-day operations" of that entity. . . . Other factors considered by the court include whether the entity is an independent corporation . . . , whether the government is involved in the entity's finances . . . , and whether the entity's mission promotes U.S. policy, . . . Examining the organization and functions of the Federal Reserve Bank , and applying relevant factors, we conclude that the Reserve Bank is not a federal agency for the purposes of FTCA, but an independent, privately owned and locally controlled corporation.
Each Federal Reserve Bank is an independent corporation owned by the commercial banks in its district. Joint-stock commercial banks elect two-thirds of each bank's nine board members. The remaining three directors are appointed by the Federal Reserve Board. The Federal Reserve Board supervises the Reserve Banks, but direct oversight and control of each bank is exercised by its Board of Directors. 12 American Code denominations. 301. Directors make bylaws regulating the manner in which the general business of banks is to be conducted, 12 U.S.C. denominations. 341, and appoint officials to implement and supervise day-to-day banking activities. These activities include collecting and clearing checks, making advances to private and commercial entities, holding reserves for member banks, discounting bills of member banks, and buying and selling securities in the open market. See 12 U.S.C. Divisions. 341-361.
Each bank has the authority to carry out these activities without the daily guidance of the federal government. Thus, for example, interest rates on advances to member banks, individuals, partnerships and corporations are set by each Reserve Bank, and their decisions about buying and selling securities are likewise made independently.
It is clear from the legislative history of the Federal Reserve Act that Congress did not intend to provide direction to the federal government regarding the day-to-day operations of the Reserve Bank:
It is recommended that the government retain sufficient powers
The Reserve Bank enables it to exercise direct powers in the following circumstances
It is necessary to do so, but it will never try to continue
Through its own mechanism, day-to-day operations and banking
A detailed knowledge of local and personal credit is required, and
Identify community funding in any given situation. other
In other words, the Reserve Bank plan preserves the government's
Exercising broader banking functions, while it is left to the
Practical Orientation for Individuals and Private Organizations
H.R. Report No. 69 Cong. first session. 18-19 (1913).
The fact that the Federal Reserve regulates the Reserve Banks does not make them federal agencies under the Act. In United States v. Orleans, 425 U.S. 807, 96 S.Ct. 1971, 48 L.Ed.2d 390 (1976), the Supreme Court held that a community action agency was not a federal agency or an instrument for the purposes of the Act, even if the agency was Government organized by federal statute and heavily funded by the federal government. Because the agency's day-to-day operations are not overseen by the federal government but by local officials, the court declined to expand federal tort liability for negligence by the agency's employees. Likewise, the Federal Reserve Bank, while heavily regulated, is controlled locally by its member banks. Unlike a typical federal agency, each bank has the authority to hire and fire employees at will. Bank employees do not participate in the civil service retirement system. They're covered by workers' compensation insurance purchased by the bank, not federal employees' compensation laws. Employees traveling for banking business are not subject to federal travel regulations and do not receive government employee discounts on accommodations and services.
None of these banks are classified as "wholly owned" government corporations under 31 U.S.C. sect. 846 is also not a "mixed ownership" corporation under 31 U.S.C. sect. 856, one factor considered was Pearl v. United States, 230 F.2d 243 (10th Cir. 1956), which held that the Civil Air Patrol was not a federal agency under the Act. Much like the Federal Reserve Bank, Civil Air Patrol is a not-for-profit federally chartered corporation designed to serve the public good. But because Congress has limited control over the Civil Air Patrol and the company is not designated as a wholly or mixed government corporation under 31 U.S.C. sects. 846 and 856, the court concluded that the company was a non-governmental independent entity not subject to the Act.
In addition, the Reserve Bank, as a private entity, does not receive any funding from Congress. . . .
Finally, banks have the right to sue and be sued in their own name. 12 American Code denominations. 341. They maintain their own liability insurance and usually handle and process their own claims. In the past, banks have defended infringement claims directly through private attorneys rather than government attorneys. . . , they were never required to resolve infringement claims under 28 U.S.C. administrative proceedings. sect. 2672. Thus, it appears that the waiver of sovereign immunity contained in the Act does not apply to banks that have not historically required or obtained general immunity from judicial process.
 For some purposes, the Reserve Bank is properly considered a federal agency. In United States v. Hollingshead, 672 F.2d 751 (9th Cir. 1982), the Court held that an employee of the Federal Reserve Bank responsible for advising the disbursement of federal funds was a "public official" under the Federal Bribery Act. The statute broadly defines a public official to include anyone who acts "for or on behalf of the government." . . . The standard for determining public official status depends on whether there was "substantial federal involvement" in the defendant's activities. United States v. Hollingshead, 672 F.2d at 754. In contrast, federal liability under the FTCA is narrowly based on traditional agency principles and does not necessarily exist when the infringer simply works for one entity, such as the Reserve Bank, that performs essential activities of the government.
[4, 5] For purposes of exemption from state taxes, the Reserve Bank is considered a federal agency. . . . However, the test for determining whether an entity is a federal agency for protection from state or local action or taxation is broad: whether the entity performs essential government functions. . . . The Reserve Bank, which facilitates the country's fiscal policy, clearly performs an important government function.
However, the performance of an important government function is only a single factor and is not conclusive in litigation for tort claims. . . . State taxes have traditionally been considered a greater impediment to an entity's ability to perform federal functions than judicial process; thus, tax exemptions have been widely applied. . . . However, federal tort liability is based on traditional agency principles and thus depends on the principal's ability to control the actions of its agent, not just on whether the entity performs important governmental functions. . . .
Brinks Inc. v. Board of Governors of the Federal Reserve System, 466 F.Supp. 116 (D.D.C. 1979), holding that the Federal Reserve Bank is a sect of the Service Contracts Act (41 U.S.C. 351. Court cited Boston Fed and Minneapolis The Federal Reserve Bank, for example, applied the "significant government function" test and concluded that the term "Federal Government" in the Service Contracts Act must be "freely construed to achieve the humanitarian Individuals under contract provide minimum wage and fringe benefit protection.” ID. 288 Michigan 120, 284 N.W.2d 667.
For the purposes of the Act, this liberal interpretation of the term "federal agency" is unwarranted. Unlike the Brinks case, plaintiffs are not without a forum for seeking redress, as they can file appropriate state tort suits directly against the banks; if successful, their recovery prospects are bright, as these institutions are highly solvent and adequately insured .
For these reasons, we believe that the Reserve Bank is not a federal agency within the meaning of the Federal Tort Claims Act, and we affirm the district court's decision.
It follows that, in some cases, the Federal Reserve Bank can be considered an "instrument" of the government, but not a "federal agency" because the term carries with it the assumption that the federal government directly oversees what the Fed does in this way. Of course not, as most people who understand the issue know that the Fed is "politically independent".
The only area where people might disagree with the judge's decision is his notion that the Fed furthers the federal government's fiscal policy and thus performs an important government function. While we expect the federal government and the Fed to cooperate with each other, and they may sometimes cooperate, the Fed is never required to do so. As an example, Rep. Wright Patman, chairman of the House Banking Committee, stated in congressional records as far back as the 60s that, depending on the temperament of the Fed chairman, sometimes the Fed will cooperate with the government's fiscal policy, and sometimes it will not Cooperating with the government's fiscal policy is either going in the exact opposite direction, or threatening to do so in order to influence policy.
The common notion that the Federal Reserve is accountable to the government is incorrect because it must report its activities to Congress annually. A report to Congress means little unless the content of the chairman's report can be corroborated by the full record. Since its inception, the Federal Reserve has never conducted a complete independent audit. Time and time again, Congress has asked the Fed to voluntarily submit to a full audit, only to be denied each time.
Anyone who knows the Fed knows that it does keep certain records secret. Rep. Henry Gonzales, the soon-to-be chairman of the House Banking Committee, has repeatedly said publicly that the Fed at one point said it didn't have records for certain requirements, and then found through investigations that it actually did have those records, or at least had them. Had. The Fed chair appears to be able to say whatever he wants to Congress and they will have to accept what he says because it is not always possible to verify what he says.
The original source of this article is http://www.save-a-patriot.org/files/view/frcourt.html
Copyright©global studies, http://www.save-a-patriot.org/files/view/frcourt.html, 2008
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