Who Owns The Federal Reserve Bank? Why is it shrouded in myth and mystery? (2023)

Who Owns The Federal Reserve Bank? Why is it shrouded in myth and mystery?
Professor Ismail Hussain-Zadeh
Global Studies, December 19, 2015


It is enough that the people of the country do not understand our banking and monetary system, because if they did, I believe there would be a revolution before tomorrow morning. (Henry Ford)

Let me control a country's money supply and I don't care who makes the laws. (M. A. Rothschild)

The Federal Reserve Bank (or simply the Fed) is shrouded in many myths and mysteries. These include its name, its ownership, its claimed independence from outside influence, and its presumed commitment to market stability, economic growth, and the public good.

The first major myth accepted by most people in and outside the United States is that, as its name: The Federal Reserve Bank implies, the Federal Reserve is owned by the federal government. But in reality, it is a private institution whose shareholders are commercial banks; it is the "bankers" bank. Like other corporations, it is guided by and committed to the interests of its shareholders, despite formal oversight by Congress.

Therefore, the choice of the word "Federal" in the bank's name appears to be a deliberate misnomer designed to give the impression that it is a public entity. In fact, there is more to the misrepresentation of its ownership than the insinuation or impression its name creates. More importantly, it also officially and clearly states on its website: "The Federal Reserve System fulfills its public mission as an independent entity within the government. It is not owned by anyone, nor is it a private, for-profit institutionª [ 1].

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To expose this blatant misrepresentation, the late Louis McFadden, Congressman and Chairman of the House Banking and Currency Committee in the 1930s, described the Federal Reserve as follows:

Some people think of the Federal Reserve Bank as an agency of the U.S. government. They are private monopolies preying on these American people for their own benefit and that of their foreign clients; domestic and foreign speculators and crooks; and wealthy and predatory moneylenders.

The fact that the Federal Reserve is committed first and foremost to the interests of its shareholders, the commercial banks, explains why its monetary policy increasingly caters to the interests of the banking industry and, more generally, of the financial oligarchy. Widespread deregulation leading to the 2008 financial crisis, scandal-ridden bank bailouts in response to the crisis, continued influx of interest-free money from "too big to fail" financial institutions, failure to impose effective constraints on these financial institutions post-crisis institutions, Neoliberal brutal cuts to social safety net programs to pay for high financial gambling losses, and other similarly brutal austerity policies, can be traced to the political and economic power of the financial oligarchy, largely exercised through the Fed’s monetary policy.

This also explains why many early U.S. policymakers resisted entrusting the crucial tasks of money supply and credit creation to profit-oriented private banks:

The [private] Central Bank is an institution most mortal hostile to the principles and form of our Constitution. . . . if the American people allow private banks to control the issuance of their money. . . , the banks and corporations that will grow around them will strip people of all their property until their children wake up homeless on a continent conquered by their fathers (Thomas Jefferson, 3rd President of the United States).

In 1836, Andrew Jackson abolished the Bank of the United States, arguing that it had had an undue and unhealthy influence on the course of the national economy. From then until 1913, the United States did not allow a private central bank. For nearly three-quarters of a century, monetary policy was conducted more or less according to the U.S. Constitution: "Congress alone shall have power." . .minting money, regulating its valueª (Article 1 Section 8 of the United States Constitution). Shortly before the creation of the Federal Reserve Bank in 1913, President William Taft (1909-1913) promised to veto any legislation that included the creation of a private central bank.

However, shortly after Woodrow Wilson replaced William Taft as president, the Federal Reserve Bank was created (December 23, 1913), thereby consolidating the power of the Bank of Expansion, and (in a roundabout way) employment. It can also lend money to the government and earn interest, or a fee currency that the government can create for free. This led to the beginning of a gradual increase in the national debt, as the government henceforth relied more on bank borrowing than self-financing, as it had done before the power of money creation was delegated to the private banking system. However, three years after the Federal Reserve Act was signed into law, Wilson was quoted as saying:

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I am a most unfortunate person. I unknowingly ruined my country. A great industrial nation is controlled by its credit system. Our credit system is centralized. Therefore, the development of the country and all our activities are in the hands of a few. We have become one of the worst governed governments, one of the most completely controlled and dominated governments in the civilized world. No longer a government of free opinion, of majority belief and vote, but of opinion and coercion by a ruling few[2].

While many independent thinkers and policymakers in the past thus viewed the unfettered power of a private central bank as an evil in allowing no intervention in national monetary/economic policy, most economists and policymakers today view the independence of central banks as Sex comes from the bank of the people and elected government agencies is a virtue!

Here lies another myth created around the Fed: that it is an independent, purely technocratic or impartial decision-making entity, entirely dedicated to the national interest and free from all outside influence. Virtually every college or high school textbook on macroeconomics, money and banking, or finance has a section or chapter devoted to the "advantages" of the "independence" of private central banks in determining the "proper" money supply levels, inflation, or the amount of credit an economy might need—always equate independence from elected authorities and citizens with general independence. In practice, however, central bank independence means independence from the people and elected government institutions, not from powerful financial interests.

Independence actually means that the central bank is captured by Wall Street interests, very large banking interests. It may be independent of politicians, but that doesn't mean it's a neutral arbiter. During and out of the Great Depression, the Fed took cues from Congress. Throughout the 1940s, the Fed was not actually independent. It took orders from the White House and the Treasury, and it was the most successful decade in American economic history [3].

Another major myth associated with the Federal Reserve is its purported commitment to the national and/or public interest. This supposed task is said to be accomplished through monetary policies that would mitigate financial bubbles, align the supply of credit or money with business and manufacturing needs, and inject purchasing power into the economy through massive investments in infrastructure projects, Thereby promoting market stability and economic expansion.

That was true right after the Great Depression and World War II, when the Fed had to follow the guidelines of Congress, the White House, and the Treasury Department. Because the regulatory framework of New Deal economic policies limited the role of commercial banks to financial intermediaries between depositors and investors, financial capital flowed in tandem with industrial capital as it essentially provided the lubricant for the wheels of industry or production. In those cases, where financial institutions primarily acted as conduits for funneling and funneling national savings into productive investment, financial bubbles were rare, temporary, and small.

Not so in the age of finance capital. Freed from the regulatory constraints shortly after World War II (which dictated the type, amount and scope of its investments), the financial sector effectively became one gigantic casino. So the Fed has turned monetary policy (since the days of Alan Greenspan) into a tool for further enrichment by creating and sustaining asset price bubbles. In other words, the Fed's monetary policy has effectively become a means of redistribution from the bottom up.

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This is not speculation or conspiracy theory: the redistributive effects of Fed policy in favor of financial oligarchs are supported by undeniable facts and figures. For example, a recent Pew Research Center study on income/wealth distribution (published December 9, 2015) showed that systemic and escalating socioeconomic polarization has led to a sharp decline in the number of middle-income Americans.
Research shows that for the first time, middle-income households no longer make up the majority of American households: ¦ Once an absolute majority, in 2015 middle-income households had as many adults as low-income households and high-income households combined. ¦ Specifically, while adults in middle-income households made up 60.1 percent of the total adult population in 1971, they now make up only 49.9 percent.

According to the Pew report, middle-income households’ share of national income fell from 62 percent in 1970 to 43 percent in 2014. Over the same period, the share of households with higher incomes rose from 29 percent to 49 percent.

Some critics argue that the financial oligarchs used their proxies at the Federal Reserve and Treasury to use the 2008 financial crisis as shock therapy, diverting trillions of taxpayer dollars into their deep pockets, further exacerbating an already crippling crisis. Resources are unevenly distributed. Pew research clearly confirms the plunder of national resources by the financial elite. It shows that the pace of rising inequality accelerated after the 2008 market crash, as asset reflation has since shifted almost exclusively to oligarchic financial interests.

Agents of the financial oligarchy, who preside over economic policymaking, no longer seem to object to the destabilizing bubbles they help create. They seem to believe (or hope) that the possible disruption of one bubble bursting can be offset by creating another! So, after the dotcom bubble, there was a housing bubble; after that, there was an energy price and emerging market bubble, and then there was a junk bond market bubble, and so on. For the same reason the Fed has re-inflated one bubble after another, it has also systematically redistributed wealth and income from the bottom up.

This is an extremely ominous trend because, in addition to issues of social equity and economic insecurity for the masses, the policy of regularly creating and protecting asset bubbles is not sustainable in the long run. No matter how long or how much a financial bubble grows, like taxes and rents under a feudal system, it is ultimately limited by the amount of real value produced in the economy.
Is there a solution to the damage done to the economies/societies of core capitalist countries by the accumulation needs of parasitic finance capital - largely fostered or fueled by private central banks in these countries?

Yes, there is indeed a workaround. The solution is ultimately political. It requires different politics and/or policies: politics that serve the interests of the vast majority, not a cabal of financial oligarchs.

There is little dispute that profit-oriented commercial banks and other financial intermediaries are a major source of financial instability. It is also well known that powerful financial interests, because of their economic and political clout, easily subvert government regulation, periodically recreating financial instability and economic turmoil. In contrast, public sector banks can do a better job of securing depositors' savings and helping to channel these savings into socially beneficial credit allocation and productive investment.

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Ending recurring crises in financial markets therefore requires bringing destabilizing financial intermediaries under public ownership and democratic control. It is logical that public rather than private institutions should manage people's money and savings or economic surplus. As the late German economist Rudolf Hilferding said long ago, the system of pooling people's savings and placing them at the disposal of profit-seeking private banks is a kind of perverse socialism, that is, it favors Socialism for the Minority:

In this sense, a fully developed credit system is the antithesis of capitalism, representing organization and control rather than anarchy. It originated in socialism, but adapted to capitalist society; it is a deceitful socialism, modified to suit the needs of capitalism. It socializes other people’s money for use by a few [4].

There are compelling reasons, both conceptually and empirically, for public sector banking and credit systems to be not only more reliable but also more efficient than private banks. Neighborhood savings banks, credit unions, and savings and loan associations in the United States, the Jusen Corporation in Japan, the Trust Savings Bank in England, and the Commonwealth Bank of Australia all served communities' housing and other credit needs well in the 19th century. Perhaps the most interesting and illuminating example is the case of the North Dakota Bank, which has been state-owned for nearly a century and is widely known for the state's budget surplus and economy that has remained strong amid a harrowing economic crisis. Acclaimed. The plight of many other states.

The idea of ​​putting banking, national savings, and the distribution of credit under public control or oversight is not necessarily socialist or ideological. In the same way that much infrastructure, such as public roads, school systems, and sanitation facilities, is provided and operated as an essential public service, the provision of credit and financial services can deliver day-to-day business transactions and long-term industrial projects on an essential public utility model.

Providing financial services and/or credit facilities on a utility model can reduce financial costs for both producers and consumers. Today, 35% to 40% of all consumer spending is misappropriated by the financial sector: bankers, insurance companies, non-bank lenders/financiers, bondholders, etc. [5]. By freeing consumers and producers from so-called financial overhead or rent, similar to ground rent under feudalism, the public option of credit and/or the banking system could revive many stagnant economies that would never Depression under the heavy burden of debt service obligations.

[1] "Who Owns the Federal Reserve?"
[2] This passage from President Wilson is quoted in several places. Many commentators felt that some of the curse words used in the much-quoted statement were either not Wilson's own or were taken out of context. Yet no one denies that, regardless of the exact language used, he has serious reservations about the formation of the Federal Reserve Bank and the misguided policy of entrusting the nation's money supply and/or monetary policy to a group of private bankers.
[3]. Ellen Brown, "How the Fed Repaired the Economy" and Why It Didn't,
[4] Hilferding's book Finance Capital: A Study in the Latest Stage of Capitalist Development has been printed/reprinted several times. This quote is from Chapter 10 of the online version of the book, available at:
[5]. Margrit Kennedy, Occupy the Money: Creating an Economy That Works for Everyone, Gabriola Island, British Columbia (Canada): New Society Press, 2012.
Ismael Hossein-zadeh is Professor Emeritus of Economics (Drake University). He is the author of Beyond Mainstream Explanations of the Financial Crisis (Routledge 2014), The Political Economy of American Militarism (PalgraveMacmillan 2007), and Non-Capitalist Development in the Soviet Union: The Case of Nasser's Egypt (Praeger Publishers 1989). He is also the author of Despair: Barak Contributor to Obama and the Politics of Illusion.
The original source of this article is Global Research
Copyright © Prof. Ismael Hossein-Zadeh, Global Studies, 2015


Who owns the Federal Reserve bank? ›

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 owns the Federal Reserve banks quizlet? ›

The Fed is publicly owned by its Board of Governors.

Who controls the money in the Federal Reserve? ›

The Board of Governors, an agency of the federal government that reports to and is directly accountable to Congress, provides general guidance for the System and oversees the 12 Reserve Banks.

How many banks own the Federal Reserve? ›

Structure and Function. 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.

Are federal banks owned by the 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.

Are Federal Reserve banks 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.

Is the Federal Reserve bank independent? ›

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.

What percentage of United States banks belongs to the Federal Reserve? ›

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.

Where did the Federal Reserve come from? ›

It was created by the Congress to provide the nation with a safer, more flexible, and more stable monetary and financial system. The Federal Reserve was created on December 23, 1913, when President Woodrow Wilson signed the Federal Reserve Act into law.

Does the president have power over the Federal Reserve? ›

But a president cannot officially bar the Fed from raising or lowering interest rates. When experts say the Fed is independent, that's mostly because the central bank has the power to raise, lower or maintain interest rates without approval from the legislative or executive branches.

Who is the Federal Reserve accountable to? ›

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.

What backs the money supply of the United States? ›

Government backs the money supply.

In the United States, the money supply is backed up by the government, which guarantees to keep the value of the money supply relatively stable.

Is my Social Security number linked to a Federal Reserve Bank account? ›

The claim that numbers on a Social Security card can be used as a routing and account number to make purchases is FALSE, based on our research. The Fed has debunked the claim on numerous occasions. It is not possible for an individual to have a bank account with the Fed.

How much money does the Federal Reserve have? ›

As shown in figure 1, total assets on the Federal Reserve's balance sheet rose roughly $490 billion over the past two quarters, to stand at nearly $8.9 trillion or 37 percent of gross domestic product (GDP) as of March 30, 2022.

Who prints money in the US? ›

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.

Does the Federal Reserve pay taxes? ›

(c) Exemption From Taxation.

Federal reserve banks, including the capital stock and surplus therein, and the income derived therefrom shall be exempt from Federal, State, and local taxation, except taxes upon real estate.

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.

Why are there 12 Federal Reserve banks? ›

Each of the 12 Federal Reserve Banks serves its geographic district in various ways, including, but not limited to, distributing paper currency and coins, processing automated electronic payments and monitoring commercial banks to ensure compliance with regulations and banking practices.

Is Federal Reserve bank accountable 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.

Do we need Federal Reserve? ›

Fo r Congress, the Federal Reserve is relevant because (1) the U.S. Constitution (Article I, Section 8 ) explicitly gives Congress the power over money and the regulation of its value and (2) thi s responsibility was delegated by Congress to the Federal Reserve; the Federal Reserve was created by an act of Congress.

What would happen if there was no Federal Reserve? ›

Though there might be short-term bouts of inflation and deflation, in the long run, prices could easily remain stable. There are, of course, caveats. For example, massive borrowing could spark inflation. And the country would also be forced to periodically deal with the relatively unfamiliar territory of deflation.

How much money does the average person have in their bank account? ›

Average Savings of Americans Over Time

In terms of median values, the 2019 figure of $5,300 is 10.65% higher than the 2016 median balance of $4,790. Transaction accounts provide account owners with immediate access to cash.

How much money can I deposit in the bank without being reported? ›

Banks must report cash deposits totaling $10,000 or more

When banks receive cash deposits of more than $10,000, they're required to report it by electronically filing a Currency Transaction Report (CTR). This federal requirement is outlined in the Bank Secrecy Act (BSA).

Can the government see how much money is in your bank account? ›

The federal government has no business monitoring small cash deposits and how Americans pay their bills and has no right to snoop around in private checking accounts without a warrant.

Who originally created the Federal Reserve? ›

President Woodrow Wilson signed the Federal Reserve Act in December 1913, culminating three years of discussion and debate over the development of a central bank.

Who were the six men who created the Federal Reserve? ›

In November 1910, six men – Nelson Aldrich, A. Piatt Andrew, Henry Davison, Arthur Shelton, Frank Vanderlip and Paul Warburg – met at the Jekyll Island Club, off the coast of Georgia, to write a plan to reform the nation's banking system.

What is a key power of the Fed? ›

The Federal Reserve monitors financial system risks and engages at home and abroad to help ensure the system supports a healthy economy for U.S. households, communities, and businesses.

Who can fire the head of the Federal Reserve? ›

The president may not have the legal authority to dismiss a chairman before the end of a term, although this assumption has never been tested in court. The current chairman is Jerome Powell, who was sworn in on February 5, 2018.

What power does the president have over federal crimes? ›

The president of the United States is authorized by the U.S. Constitution to grant a pardon for a federal crime. The other forms of the clemency power of the president are commutation of sentence, remission of fine or restitution, and reprieve.

Who has the most power in the federal government? ›

The President is both the head of state and head of government of the United States of America, and Commander-in-Chief of the armed forces.

How can Congress check the power of the Federal Reserve? ›

The Federal Reserve is subject to oversight by Congress. Board governors and staff testify before Congress frequently to discuss issues within the Federal Reserve's purview. For example, in 2008, governors and Board staff testified 35 times before Congress.

Does the Federal Reserve report to Congress? ›

The Federal Reserve Act requires the Federal Reserve Board to submit written reports to Congress containing discussions of "the conduct of monetary policy and economic developments and prospects for the future." This report⁠—called the Monetary Policy Report⁠—is submitted semiannually to the Senate Committee on Banking ...

What controls the majority of America's money supply? ›

"The Fed" controls the money supply in the United States by controlling the amount of loans made by commercial banks. New loans are usually in the form of increased checking account balances, and since checkable deposits are part of the money supply, the money supply increases when new loans are made ...

Who has the most control over the total supply of money in the US? ›

Just as Congress and the president control fiscal policy, the Federal Reserve System dominates monetary policy, the control of the supply and cost of money. Since monetary policy affects every sector of the economy, the Fed has to be considered coequal with the president and Congress in macroeconomic decision making.

Can the US money supply decrease? ›

Shrinking money supply is rare but has been buried this year in the blizzard of market volatility around the Fed's aggressive interest rate hikes, and more recently, the banking shock that has rocked rates and bond markets, and the central bank's expectations.

Which Federal Reserve Bank is the richest? ›

Rankings by Total Assets
RankProfileTotal Assets
1.Federal Reserve System$8,593,263,000,000
2.Bank of Japan$5,878,875,571,224
3.People's Bank of China$5,144,760,000,000
4.Deutsche Bundesbank$2,684,748,269,640
92 more rows

Who is the Fed accountable to? ›

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.

How much does the President of the Federal Reserve get paid? ›

Fed Chairman Jerome Powell told David Rubenstein that he earns about $190,000 per year in salary. He said that he thinks the amount he earns is fair. "If we have family expenses that exceed my salary, then we have to sell an asset," he explained.

How much gold does the US own? ›

How much gold does the U.S. have? The U.S. gold reserves have more than 8,000 metric tons of gold, nearly as much gold as the next three countries on the list combined! Explore our world map to see which countries have the largest gold reserves in the world.

How powerful is the US Federal Reserve? ›

The Federal Reserve is the most powerful economic institution in the United States. It is responsible for managing monetary policy and regulating the financial system.

Which banks are in trouble? ›

List of Recent Failed Banks
Bank NameCityState
First Republic BankSan FranciscoCA
Signature BankNew YorkNY
Silicon Valley BankSanta ClaraCA
May 8, 2023

What is the #1 bank in America? ›

List of largest banks in the United States
RankBank nameHeadquarters location
1JPMorgan ChaseNew York City
2Bank of AmericaCharlotte
3CitigroupNew York City
4Wells FargoSan Francisco
81 more rows

Who are the biggest investors in the Federal Reserve? ›

The big reveal for year-end 2018: Citibank, the No. 1 institution on the roster, held 87.9 million New York Federal Reserve Bank shares – or 42.8 percent of the total. The No. 2 holder stockholder was JPMorgan Chase Bank, with 60.6 million shares, equal to 29.5 percent of the total.

What was before the Federal Reserve? ›

The National Monetary Commission, 1907-1913.

What assets does the Federal Reserve own? ›

These assets include: holdings of Treasury, agency, and mortgage-backed securities; discount window lending; lending to other institutions; assets of limited liability companies (LLCs) that have been consolidated onto the Federal Reserve's balance sheet, and foreign currency holdings associated with reciprocal currency ...

Where does the US government keep its money? ›

Treasury's operating cash is maintained in an account at the Federal Reserve Bank of New York and in Tax and Loan accounts at commercial banks. The Daily Treasury Statement (DTS) is available by 4:00 p.m. the following business day.

Can Congress control the Fed? ›

CONGRESS oversees the Federal Reserve System and its entities. BOARD OF GOVERNORS is an independent agency of the federal government. FEDERAL RESERVE BANKS are the operating arms of the Federal Reserve System and are supervised by the Board of Governors.


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