Who Really Owns the Federal Reserve?
Who Really Owns the Federal Reserve?
How the Fed Remains Independent
By Kimberly Amadeo Updated January 30, 2022 Reviewed By Erika Rasure
How does the federal reserve work and who owns it? The Fed is comprised of a government-appointed central board and 12 regional banks; Federal Reserve Board is an independent agency of the federal government, and its decisions don’t need approval from the president, legislators, or any elected officials; The Fed is accountable to the public and Congress - The Fed’s funding comes from investments; The Fed’s primary function is to manage inflation
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.1
Learn how the Federal Reserve works, who actually owns it, and how they are held accountable.
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 that the Fed has both.2
Congress and the Fed
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.3 Congress must approve the president's appointment. The chair must report on the Fed's actions to Congress.4
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 required the Government Accountability Office (GAO) 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.5
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.
Funding
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.
To continue reading, please go to the original article here:
https://www.thebalance.com/who-owns-the-federal-reserve-3305974