Who owns the Fed? - Global Studies (2023)

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.