This article was first published by Global Research in October 2008
"There are those who think of the Federal Reserve Banks as agencies of the United States government. They are private monopolies preying on the American people for their own benefit and that of their foreign clients; domestic and foreign speculators and crooks; and wealthy and predatory moneylenders. "– The Honorable Louis McFadden, Chairman of the House Banking and Currency Committee in the 1930s
The Federal Reserve (or Federal Reserve) was given sweeping new powers last year. In March 2008, the New York Fed made the unprecedented move to advance funds for JPMorgan Chase to buy investment bank Bear Stearns for pennies. The deal is particularly controversial because JPMorgan Chase & Co chief executive Jamie Dimon sits on the New York Fed board and was involved in the weekend's secret negotiations. 1 In September 2008, the Federal Reserve did something unprecedented when it purchased the world's largest bancassurance company. The Federal Reserve announced on Sept. 16 that it would lend $85 billion to American International Group (AIG) for a nearly 80% stake in the giant insurer. The Associated Press calls it a "government takeover," but it's no ordinary nationalization. Unlike the U.S. Treasury Department, which took over Fannie Mae and Freddie Mac a week ago,The Federal Reserve is not a government-owned institutionAlso unprecedented is how the deal was financed. The Associated Press reports:
"The Ministry of Finance,first time in history, said it would start selling bonds for the Fed to help the central bank cope with its unprecedented borrowing needs. "2
This is extraordinary. Why does the Treasury issue U.S. government bonds (or debt) to fund the Federal Reserve, itself a "lender of last resort" for banks and the federal government? Yahoo Finance reported on September 17:
"At the request of the Fed, the Treasury Department is developing an interim funding program. The program will auction off Treasury bills to raise cash for the Fed's use. The initiative is designed to help the Fed manage its balance sheet after working to strengthen its liquidity facility over the past few quarters surface."
Typically, the Fed swaps green pieces of paper called Federal Reserve Notes for pink pieces of paper called U.S. bonds (IOUs from the federal government) in order to provide Congress with dollars that cannot be raised through taxation. It now appears that the government is not issuing bonds for itself, but for the Fed! Perhaps the plan is to swap them directly for the banks' unreliable derivatives collateral, rather than actually selling them to outside buyers. According to Wikipedia (which translates Fedspeak into clearer terms than the Federal Reserve's own website):
"The Term Securities Lending Facility is a 28-day facility that will provide Treasury general collateral to primary dealers at the Federal Reserve Bank of New York in exchange for other program-eligible collateral. It is designed to facilitate Treasury and other collateral facilitates the functioning of financial markets more broadly by providing liquidity in commodity financing markets. . . . The resource allows dealers to convert less liquid debt into easily traded U.S. government securities."
"Switching illiquid debt into easily tradable U.S. government securities" meant the government got banks' toxic derivatives debt, and the banks got government AAA-rated securities. Unlike risky derivative debt, Commonwealth securities are considered "risk-free" in determining capital requirements, allowing banks to improve their capital positions in order to make new loans. (See E. Brown, "Bailout Bedlam," webofdebt.com/articles, Oct. 2, 2008.)
In the latest power play on October 3, 2008, the Fed gained the ability to pay interest to its member banks on bank reserves held at the Fed. Reuters reported on October 3:
"The Fed got a key tactical tool from the $700 billion financial rescue plan signed into law on Friday that will help it channel money into parched credit markets. The 451-page bill contains a provision that says Allow the Federal Reserve to pay interest on the reserves that banks must hold at the central bank.”3
If the Fed money ends up coming from taxpayers, that means we taxpayers are paying banks interest on the banks' own reserves - reserves that are kept for their own private profit. These increasingly contentious encroachments on public purses require a closer look at central bank programs themselves. Who owns the Fed, who actually controls it, where does it get its money from, and whose interests does it serve?
Not private nor for profit?
The Fed's website insists it isnoprivate company, yesnofor profit, and isnoFunded by Congress. But is it true? Founded in 1913, the Fed was the "lender of last resort" that backed bank runs after a particularly severe banking panic in 1907. That means keeping intact the system's most valuable asset, the monopoly on creating the nation's money supply. With the exception of coins, every dollar in circulation today is privately created as a liability to the Federal Reserve or the banking system it leads. 4 The Fed's website tries to gloss over its role as the chief defender and protector of this private banking club, but let's take a closer look. The site states:
* "The 12 regional Federal Reserve Banks created by Congress are the operating arm of the nation's central banking system, and they are organized much like private corporations—potentially leading to some confusion about 'ownership'. For example, Reserve Banks issue stock to member banks. However, owning shares in a Reserve Bank is very different from owning shares in a private company. The Reserve Bank is not for profit and by law owning a certain number of shares is a condition of membership in the system. Shares may not be sold, traded or pledged as security for loans; By law, the dividend is 6% per annum."
* “[The Federal Reserve] is considered an independent central bank because its decisions do not have to be approved by the president or anyone else in the executive or legislative branch of government, it receives no appropriations from Congress, and its terms governing board members span multiple presidents and congressional terms.”
* “The Federal Reserve receives its revenue primarily from interest on U.S. government securities it acquires through open market operations . . .
So let's recap:
1.The Federal Reserve is private.
Its shareholders are private banks. In fact, 100% of its shareholders are private banks. None of its stock is owned by the government.
2.The fact that the Fed does not receive "appropriations" from Congress basically means that it receives funds from Congress through participation in "open market operations" without congressional approval.
Here's how it works: When the government runs short of money, the Treasury Department issues bonds and delivers them to bond dealers, who auction them off. When the Fed wants to "expand the money supply" (create money), it steps in and buys bonds from these dealers with newly issued dollars acquired by the Fed and writes them into accounts on computer screens. These operations are called "open market operations" because the Fed buys bonds from bond dealers in the "open market." These bonds then become "reserves" that banking institutions use to back their loans. In another gimmick known as "fractional reserve" lending, the same reserve is lent out multiple times, further expanding the money supply, with each loan generating interest for the bank. It was this process of creating money that prompted House Banking and Currency Committee Chairman Wright Patman in the 1960s to refer to the Federal Reserve as "a money machine through and through." He wrote:
"When the Fed writes a check on a government bond, it does exactly what any bank does,It creates money, it creates money purely and simply by writing a check”
3.The Fed Generates Profits for Its Shareholders.
Pays the Fed's operating expenses with the interest on bonds it buys with newly issued Federal Reserve notes and guarantees a 6 percent return to its bankers shareholders. A profit of just 6% per year may not be considered profitable in the high-wallet world of Wall Street finance, but most businesses that manage to pay all their expenses and guarantee a 6% return to shareholders are considered "for-profit" companies.
In addition to the guaranteed 6%, banks now earn interest on taxpayers' "reserves". The basic reserve requirement ratio set by the Federal Reserve is 10%. The New York Fed's website explains that this 10% of "reserves" can be spread out to 10 times the total amount of loans as money is re-deposited and moved throughout the banking system; that is, a $10,000 reserve becomes Became a $100,000 loan. Federal Reserve Statistical Release H.8 pegged total “bank credit loans and leases” at $7,049 billion as of September 24, 2008. Ten percent of that is $700 billion. That means we, the taxpayers, are paying banks at least $700 billion a year in interest -- so the banks can keep reserves to accrue ten times the total amount of loans in interest.
Banks receive these returns from taxpayers because of the privilege of banks whose interests are protected by a fully independent private central bank, even though those interests may be contrary to taxpayer interests - for example when banks use their special status as private money creators , to fund a speculative derivatives scheme that threatened to collapse the U.S. economy. Among other special benefits, banks and other financial institutions (but not other companies) can borrow at the low federal funds rate of about 2%. They can then turn around and put that money into a 4.5% 30-year U.S. Treasury bond, earning 2.5% immediately from the taxpayer simply because they are the bank of choice. A long list of banks (but not other companies) are also now protected from short selling that could send prices of other stocks tumbling.
Is it time to change the regulations?
According to the Fed website, Congress' control over the Fed is limited to:
"[T]he Federal Reserve is subject to oversight by Congress, which periodically reviews its activities and can change its responsibilities by regulation."
As we know from watching the business news, "oversight" basically means Congress gets to see the results when it's over. The Fed reports regularly to Congress, but the Fed doesn't ask; it says. thisonlyCongress' real leverage over the Fed is that it "can change its mandate by regulation." It is now up to Congress to exercise that influence and make the Fed trulyfederalInstitutions, acted by and for the people through elected representatives. If the Fed can ask for AIG stock in exchange for an $85 billion loan to the giant insurance company, we can also ask for Fed stock in exchange for the trillions or so we will provide to save the private banking system from its Influence. madness.
If the Fed were actually a federal agency, the government could issue U.S. fiat currency directly, avoiding unnecessary interest-bearing debt to private intermediaries who themselves create money out of thin air. Additional Benefits for Taxpayers. A truly "federal" Fed could lend the entire confidence and credit of America to state and local governments interest-free, cut infrastructure costs in half, and restore the thriving local economies of previous decades.
Alan Brown, J.D.., as an attorney practicing civil litigation in Los Angeles, she developed her research skills. In her latest book, "The Web of Debt," she translates these skills into an analysis of the Federal Reserve and "money trust funds." She shows how this private cartel has usurped the power to create money from the people themselves, and how we the people can take it back. Her eleven books include the bestselling Nature's Pharmacy and Forbidden Medicine co-authored with Dr. Lynne Walker. her website iswww.webofdebt.comandwww.ellenbrown.com.
The original source of this article is Web of Debt and Global Research
Copyright©alan brown, Debt Networks and Global Studies, 0202
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The Federal Reserve System is not "owned" by anyone. The Federal Reserve was created in 1913 by the Federal Reserve Act to serve as the nation's central bank. The Board of Governors in Washington, D.C., is an agency of the federal government and reports to and is directly accountable to the Congress.Who is the owner of the Federal Reserve quizlet? ›
The Fed is privately owned by the government.Who does the chairman of the Fed answer to? ›
|Chairman of the Board of Governors of the Federal Reserve System|
|Reports to||United States Congress|
|Seat||Eccles Building Washington, D.C.|
|Appointer||President with Senate advice and consent|
|Term length||Four years, renewable (as Chair) 14 years, non-renewable (as Governor)|
President Woodrow Wilson signed the Federal Reserve Act into law on December 23, 1913. Prior to the creation of the Fed, the U.S. economy was plagued by frequent episodes of panic, bank failures, and scarce credit.Is the Fed a part of the government? ›
The Federal Reserve (the Fed) enjoys a unique public/private structure that operates within the government, but is still relatively independent of government to isolate the Fed from day-to-day political pressures in fulfilling its varying roles.Who owns the gold in the Federal Reserve? ›
The New York Fed acts as the guardian and custodian of the gold on behalf of account holders, which include the U.S. government, foreign governments, other central banks, and official international organizations. No individuals or private sector entities are permitted to store gold in the vault.Is the Federal Reserve independent from the President? ›
The Fed is independent in the sense that monetary policy and related decisions are made autonomously and are not subject to approval by the federal government. However, its governors are appointed by the President and must be confirmed by Congress.Which branch of government controls the Federal Reserve quizlet? ›
1913, independent agency in the federal executive branch.Who is the leader of the Fed? ›
Jerome H. Powell, Chair.How does Congress hold the Fed accountable? ›
Here are a few examples of how the Federal Reserve System is held accountable: The Federal Reserve's policy goals of price stability and maximum sustainable employment are specified by Congress, and Fed officials report regularly to Congress on progress toward meeting those goals.
There are three key entities in the Federal Reserve System: the Board of Governors, the Federal Reserve Banks (Reserve Banks), and the Federal Open Market Committee (FOMC).Which presidents opposed the Federal Reserve? ›
Wilson and his Secretary of State William Jennings Bryan, forcefully opposed "any plan which concentrates control in the hands of the banks."What is the Federal Reserve backed by? ›
Federal Reserve notes are the paper currency circulating in the United States. These are commonly known as dollar bills. The U.S. Treasury prints the Federal Reserve notes, which are backed by the U.S. government.Does the president control the Fed? ›
The president is responsible for all of the Reserve Bank's activities, including monetary policy, bank supervision and regulation, and payments services. In addition, the president serves on the Federal Reserve's chief monetary policymaking body, the Federal Open Market Committee (FOMC).Why is the Fed not government? ›
The Federal Reserve Banks are not a part of the federal government, but they exist because of an act of Congress. Their purpose is to serve the public. So is the Fed private or public? The answer is both.Does the Fed control the government? ›
The Federal Reserve, like many other central banks, is an independent government agency but also one that is ultimately accountable to the public and the Congress.What is the most guarded bank in the world? ›
The maximum-security gold vault in the Federal Reserve Bank of New York is located in the basement of the Manhattan building. The Fed is the custodian of the valuable reserves and has the responsibility of guarding it for account holders, such as the U.S. government and central banks.What president bought all the gold? ›
The Gold Reserve Act of 1934 was the culmination of this program; President Roosevelt signed the Act on January 30, 1934. Section 2 of the act transferred ownership of all monetary gold in the United States to the US Treasury.Is Fort Knox still full of gold? ›
Fort Knox Facts
The only gold removed has been very small quantities used to test the purity of gold during regularly scheduled audits. Except for these samples, no gold has been transferred to or from the Depository for many years. The gold is held as an asset of the United States at book value of $42.22 per ounce.
To remove a member of the Board of Governors, the president has to have a reason—a “cause,” to quote the statute—a term that courts have historically interpreted as requiring “inefficiency, neglect of duty, or malfeasance in office.” Policy differences are probably not enough justification, but the Supreme Court could ...
The Fed is an independent government agency but accountable to the public and Congress. The chair and Board of Governor's staff testify before Congress and submit a Monetary Policy Report twice a year. Independently audited financial statements and FOMC meeting minutes are public.Who prints U.S. money? ›
The Bureau of Engraving and Printing produces United States currency notes, operates as the nation's central bank, and serves to ensure that adequate amounts of currency and coin are in circulation.Which branch dominates the federal government? ›
The executive branch's key roles include: President - The president is the head of state, leader of the federal government, and Commander in Chief of the United States armed forces. Vice president - The vice president supports the president.
To be sure that one branch does not become more powerful than the others, the Government has a system called checks and balances. Through this system, each branch is given power to check on the other two branches. The President has the power to veto a bill sent from Congress, which would stop it from becoming a law.What are the five powers delegated to Congress? ›
- Make laws.
- Declare war.
- Raise and provide public money and oversee its proper expenditure.
- Impeach and try federal officers.
- Approve presidential appointments.
- Approve treaties negotiated by the executive branch.
- Oversight and investigations.
FAQ investors ask about the FED Chair
The world's most powerful civil servant, the FED Chair, has more economic influence than anyone, anywhere, with the job of ensuring economic prosperity. The FED Chair leads the American monetary policy process and pushes the money-creating button for the world's largest economy!
The Fed's decisions are also protected from interference from other arms of the federal government. Specifically, policy and operational decisions do not require approval from Congress or the President. Also, the Fed's operations are not financed by appropriations from Congress.Can Congress audit the Fed? ›
The Board's financial statements, and its compliance with laws and regulations affecting those statements, are audited annually by an outside auditor retained by the independent Office of Inspector General (OIG). The results of this independent audit are released to the Congress and the public.Does the Fed have to report to Congress? ›
Yes, the Federal Reserve is accountable to the public and the U.S. Congress. The Fed believes transparency is a fundamental principle of central banking that supports accountability.Does the Federal Reserve print money? ›
Each year, the Federal Reserve Board projects the likely demand for new currency, and places an order with the Department of the Treasury's Bureau of Engraving and Printing, which produces U.S. currency and charges the Board for the cost of production. The 2022 currency operating budget is $1,060.0 million.
1. A president can appoint – and technically fire – the Fed chair. Presidents nominate a Fed governor to the post of chief central banker— and experts say they could be the ones to also kick them out, though there isn't any precedent.In what ways is the Fed privately owned but publicly controlled? ›
16.1. The Fed is privately owned by its member banks, not by the government. The Fed is said to be publicly controlled because it is directed by a seven-member board of governors who are appointed by the president to govern the Fed in the public interest.Who printed money before the Fed? ›
A New Nation: 1775-1790. To finance the American Revolution, the Continental Congress printed the new nation's first paper money. Known as “continentals,” the notes were originally intended to be redeemable on demand in specie.Were the Founding Fathers against the Federal Reserve? ›
Several founding fathers bitterly opposed the Bank. Thomas Jefferson saw it as an engine for speculation, financial manipulation, and corruption. In 1811 its twenty-year charter expired and was not renewed by Congress.Did Andrew Jackson get rid of the Federal Reserve? ›
Shortly after the election, Jackson ordered that federal deposits be removed from the second National Bank and put into state banks. Although Jackson's order met with heavy criticism from members of his administration, most of the government's money had been moved out of the Bank by late 1833.Which president is on $2 dollar bill? ›
The first use of Thomas Jefferson's portrait on $2 notes was on Series 1869 United States Notes.Are they still printing $2.00 bills? ›
The note with the most value after that is an 1869 U.S. note, which is typically worth between $500 and $1,200 if circulated and as much as $3,800 if not, according to USCA. Even though the print is less common, $2 bills are still being printed (160 million entered circulation in 2019) and count as legal tender.Do banks give $2 dollar bills? ›
In reality, there are over 774 million $2 bills in circulation, and they're all valid currency. The Federal Reserve has been printing $2 regularly since 1976, after ending a decade-long hiatus. You can walk up to the teller at your bank, ask to withdraw a $2 bill, and they will give it to you.How many banks own the Fed? ›
The 12 Federal Reserve Banks and their 24 Branches are the operating arms of the Federal Reserve System. Each Reserve Bank operates within its own particular geographic area, or district, of the United States.What are the members of the Fed? ›
- Jerome H. Powell. Chair. Board of Governors. ...
- Michelle W. Bowman. Governor. Board of Governors. ...
- Lisa D. Cook. Governor. Board of Governors. ...
- Philip N. Jefferson. Governor. Board of Governors. ...
- Christopher J. Waller. Governor. ...
- Lael Brainard. Vice Chair. Board of Governors. ...
- Randal K. Quarles. Vice Chair for Supervision. ...
- Janet L. Yellen. Chair.
JPMorgan Chase & Co. is an American multinational financial services company headquartered in New York City and incorporated in Delaware. It is the largest bank in the United States and the world's largest bank by market capitalization (as of 2023).Does the president control the Federal Reserve? ›
The president is responsible for all of the Reserve Bank's activities, including monetary policy, bank supervision and regulation, and payments services. In addition, the president serves on the Federal Reserve's chief monetary policymaking body, the Federal Open Market Committee (FOMC).What percentage of banks belong to the Fed? ›
More than one-third of U.S. commercial banks are members of the Federal Reserve System. National banks must be members; state chartered banks may join by meeting certain requirements.How much do Fed members make? ›
The average Federal Reserve Board of Governors salary ranges from approximately $70,000 per year for Technology Analyst to $197,787 per year for Economist. Salary information comes from 12 data points collected directly from employees, users, and past and present job advertisements on Indeed in the past 36 months.