Who Really Owns the Federal Reserve?

Who Really Owns the Federal Reserve?

Is It a Secret Conspiracy to Create a One World Bank?

By Kimberly Amadeo   Updated October 28, 2019

The Federal Reserve is the central bank for the United States. Its decisions affect the U.S. economy, and therefore the world. This position makes it the most powerful actor in the global economy.

It is not a company or a government agency. Its leader is not an elected official. This makes it seem highly suspicious to many people because it is not subject to either voters or shareholders.

Who Owns the Federal Reserve?

The Federal Reserve is an independent entity established by the Federal Reserve Act of 1913. At that time, President Woodrow Wilson wanted a government-appointed central board. But Congress wanted the Fed to have 12 regional banks to represent America's diverse regions. The compromise meant the Fed has both.

The president and Congress must approve all members of the Federal Reserve Board of Governors. But, the board members' terms deliberately don't coincide with those of elected officials. The president appoints the Federal Reserve Chair, currently Jerome Powell. Congress must approve the president's appointment. The Chair must report on the Fed's actions to Congress.

Congress can alter the statutes governing the Fed. For example, the Dodd-Frank Wall Street Reform and Consumer Protection Act limited the Fed's powers. It requires the Government Accountability Office to audit the emergency loans the Fed made during the 2008 financial crisis.

It also required the Fed to make public the names of banks that received any emergency loans or TARP funds. The Fed must get Treasury Department approval before making emergency loans, as it did with Bear Stearns and AIG.

The Fed's Board is an independent agency of the federal government. But its decisions don't have to be approved by the president, legislators, or any elected official.

Equally as important, the Fed does not receive its funding from Congress. Instead, its funds come from its investments. It receives interest from U.S. Treasury notes it acquired as part of open market operations.

It receives interest on its foreign currency investments. Its banks receive fees for services provided to commercial banks. These include check clearing, funds transfers, and automated clearinghouse operations. The Fed also receives interest on loans it makes to its member banks. The Fed uses these funds to pay its bills, then turns any "profit" over to the U.S. Treasury Department.

The 12 regional Federal Reserve banks are set up similarly to private banks. They store currency, process checks, and make loans to the private banks within their area that they regulate. These banks are also members of the Federal Reserve banking system. As such, they must maintain reserve requirements.

In return, they can borrow from each other at the fed funds rate when needed. As a last resort, they can also borrow from the Fed's discount window at the discount rate.

To be a member of the Federal Reserve system, commercial banks must own shares of stock in the 12 regional Federal Reserve banks by law. But owning Reserve bank stock is nothing like owning stock in a private company. These stocks can't be traded. These don't give the member banks voting rights.

These pay out dividends mandated by law to be 6 percent. But the banks must return all profits, after paying expenses, to the U.S. Treasury.

Why the Fed Must Remain Independent

 

To continue reading, please go to the original article here:

https://www.thebalance.com/who-owns-the-federal-reserve-3305974

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