Who owns the Federal Reserve? 5

Not that this will settle any arguments, but it is “interesting” to see who the Federal Reserve Bank thinks of Who owns the Federal Reserve?

The Federal Reserve System fulfills its public mission as an independent entity within government.  It is not “owned” by anyone and is not a private, profit-making institution.

As the nation’s central bank, the Federal Reserve derives its authority from the Congress of the United States. It is considered an independent central bank because its monetary policy decisions do not have to be approved by the President or anyone else in the executive or legislative branches of government, it does not receive funding appropriated by the Congress, and the terms of the members of the Board of Governors span multiple presidential and congressional terms.

However, the Federal Reserve is subject to oversight by the Congress, which often reviews the Federal Reserve’s activities and can alter its responsibilities by statute. Therefore, the Federal Reserve can be more accurately described as “independent within the government” rather than “independent of government.”

I wonder if Rand and Ron Paul know of this?  If they do know, do they care?  Even if they know and care, they will still argue about what this means.  I only use the Pauls as representative of the people who argue this.

Someone is bound to say that the private member banks own shares of the Federal Reserve Bank, and thus they own it. So here is the last paragraph from the Federal Reserve’s document.

The 12 regional Federal Reserve Banks, which were established by the Congress as the operating arms of the nation’s central banking system, are organized similarly to private corporations–possibly leading to some confusion about “ownership.” For example, the Reserve Banks issue shares of stock to member banks. However, owning Reserve Bank stock is quite different from owning stock in a private company. The Reserve Banks are not operated for profit, and ownership of a certain amount of stock is, by law, a condition of membership in the System. The stock may not be sold, traded, or pledged as security for a loan; dividends are, by law, 6 percent per year.

I can imagine all the “Yes, but …”s gurgling through the readers’ minds. My take on the meaning of this second excerpt is that the “shares of stock” are more like tickets the banks have to buy if they want entry into the system. It gives the banks who buy them certain privileges and benefits, but it doesn’t give them ownership. When you buy tickets to Ringling Brothers’ Circus, do you think you own the circus?

There are other links in the document, but the above two excerpts are all the explanatory text in it at the time of writing this post.

February 11, 2019

See my subsequent post Bernanke: “The Fed will do whatever Congress tells us to do.”

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5 thoughts on “Who owns the Federal Reserve?

  • SteveG Post author

    As I said when I first posted this, I knew this wouldn’t settle anything. So I don’t expect you to believe a word of what I posted, nor of what the FED said that I quoted.

    Maybe you should call it quits. Here are two quotes from your two posts.

    Post 1 – “And in your answer, you put “owned” in quotes,”

    Post 2 – “I said the Fed put “owned” in quotes”

    As for who owns the FED, did you miss the very first sentence from what the Fed said? When I put something in a blockquote as below, it means I am quoting from the source that we are talking about.

    The Federal Reserve System fulfills its public mission as an independent entity within government. It is not “owned” by anyone and is not a private, profit-making institution.

    What part of “independent entity within government” are you having trouble with?

    I must confess that the rest of your comment fit the category of TL;DR.

    One last thing I realized, rather than making an analogy with the circus, I should have used COSTCO. If you buy a membership you are not buying ownership of COSTCO. When you buy products at COSTCO and thus fund their operations, you are not buying ownership of COSTCO. The shares you would have to buy to buy ownership at COSTCO are not like the shares that the private banks must buy to be members of the nation’s central banking system. The FED runs the nation’s central banking system but it is not the entirety of the system itself. The entirety of the system includes the member banks, too. They do not own the Fed.

  • joe bongiovanni

    I said the Fed put “owned” in quotes, my point being an intended linguistic hedge against any needed accuracy in PR reporting.
    Not attributing that to you at all.
    Didn’t intend to say anything about your writing.

    But just to be clear at this point, can you tell me who owns the Fed? Because I thought that was the question they were going to answer ….. but I only saw meager discussion of who didn’t own the Fed ….. neither us nor the banks …… leaving me to conclude that maybe “nobody” owns the Fed. Did I miss something there?.
    Or, was it perhaps a ‘trick’ question …… to serve the needs of the questioner?

    “”If I earn all my money from my customers, does that mean that my customers own my business?””
    No, it means you are a private business.
    And that’s the real point here.
    Don’t be so hung up on any ‘ownership’ question.
    The FRBS is sufficiently convoluted as to confuse a lot of pretty smart Congress people over these years.
    Not so Chairman Wright Patman of the House Banking and Currency Committee.
    He could not be bought.
    See his many comments on the nature of the Fed as relates to serving public policy.
    Also those of Henry Gonzalez, another House Banking Chair.

    And so, am I to take away here that you thought penning this PR piece from the Fed would settle some controversy?
    Some controversy of their creation?
    Understand the Fed controversy.
    It’s a private banking [and money[ system, legitimized by its Congressional creation.
    It is because it is robbing us blind that you can’t see the charade at play.

    For one thing, when you come to understand the Fed for what it is, you realize that all of the criticism of ‘governmental’ failure with the national economy (you are here) is in reality caused by the failure of the Fed system. Being non-governmental.
    Booms and Busts are the hallmark of fractional reserve banking.
    Read Adair Turner, former chief of bank supervision in the UK.
    Or Economist Martin Wolf’s new book on “The Shifts and the Shocks”.
    Wherein he calls for ending FR banking, and putting ‘radical’ reform to the money system on the table.
    Or even BIS master Dr. William White’s recent commentary on full-reserve banking.
    Let me know if you need the link on that.

    The issue, if I may, is the present private fractional reserve banking [and money] system, where all of our money is created and issued by private bankers (ce), as a debt-contract(monetary asset) from which that private banking system profits into eternity …….. on every dollar it has ever created …… the one they create tomorrow, as well as the one they created a hundred years ago.
    As a system (and as an industry), they create their financial assets out of nothing (the money power) , and then collect real wealth from the Restofus forevermore.
    THUS, wealth and income flow UPWARD under this debt-contract based system of money..
    What we have is a Creditocracy.
    I’m surprised you don’t find it offensive.
    The federal reserve banking system is a private business.
    This idea of ‘ownership’ as a salient issue is what you would call a red herring.

    But do let me know when you get that nailed down.

  • SteveG Post author

    See, I told you this wouldn’t settle any arguments. See Joe Bongiovanni’s comment below. If I earn all my money from my customers, does that mean that my customers own my business? I bet Joe really thinks he is buying the circus with those tickets.

    Oh, and by the way, I didn’t put “owned” in quotes, the Fed did.

  • joe bongiovanni

    Just for discussion, pretend you were a private, profit-making combined central bank and banking (and money-creation) SYSTEM, but that identity was being called into question with regard to the political economic narrative of the day because that entire system was broke, broken and, overall, insolvent. IOW, incapable of moving the economy forward to potential national GDP …….the balance-sheet recession being driven by the debt-saturation resulting from private debt-based money.
    Looking for cover, you issue this statement.
    “”The Federal Reserve System fulfills its public mission as an independent entity within government. It is not “owned” by anyone and is not a private, profit-making institution.””
    Oh, thank goodness !
    You put this statement out in rhetoric response to a rhetoric question of your own creation ….. “Who Owns the Fed?”
    And in your answer, you put “owned” in quotes, as the System itself is not owned…….. unfortunately.
    Such political-economic ambiguity serves the purpose of the system, gaining comfort among the Fed’s defenders, especially the private Member Banks that make their profits from their own money-creation powers, but also from the private banking supporters, notably among the quasi-progressives of the MMT belief system.

    So, from the beginning, WHERE in the legislation that establishes the Federal Reserve Banking System is that System given ANY specific public mission … (which the Fed claims to be ‘fulfilling”) or ANY identity as an independent entity within government (which is how the Fed claims to be fulfilling that mission).
    It’s not there.
    So let’s clear up some of the present ambiguity.
    NOT by asking the Fed who owns the Fed, but, first, what is the Fed?
    The Federal Reserve, the Fed, is a System composed of the BoGs, the FOMC, the Regional Fed Banks, and if correctly stated by Thomas Hoenig earlier this month, some 6500 commercial banks.
    Among each and every one of those system organizational components, of course the 6500 commercial banks are privately owned and operated, whose ‘banking’ operations produce the profits of the system for the shareholders of those bankcorporations.
    IF that is true, then what is not true is the Fed’s statement that “The Federal Reserve System ………. is not a private, profit-making institution”” Unless, the whole, ambiguous point is that the “System” is not an “Institution”.
    It is indeed a System of private, profit-making banks….. but perhaps not an institution.

    That leaves the claimed quasi- (or pseudo-) public organizational components of the BoGs, FOMC and Regional banks.
    Are they public? No.
    None of these components are public in nature and none are funded by public (taxpayer) monies.
    ALL of the monies that go into funding the salaries of the employees at every level of these pseudo-public System components come from the private profits of private bankcorporate Members of the Federal Reserve system. There are no taxpayer (public) funded employees of the entire FRBS.
    So, all of the profits of the Federal Reserve Banking System, the Fed, go to support the 100 Percent private bankcorporate structure of the system, including the salaries of the Regional Fed bankers, the Members of the FOMC and the Board of Governors.
    There are no public employees. There is no public involvement in the operation of any of those banks or the system, and I think importantly the supervision and regulation of this private banking system and these banks is all paid for BY the private bankers being supervised and regulated. The private Federal Reserve Banking System is self-regulated in that sense.
    Regulatory capture is not merely a learned associative phenomena, it is structurally inbred early on to the self-regulating aspect of the system.
    So, should the question be, ‘Who Owns the Fed’? Not really, as we can see that the ambiguous nature of the system provides wiggle room and even intellectual cover to the private money creators and issuers of this nation, and their MMT supporters. Or, should the salient point be “who does this private banking and money-issuance system own?”
    That answer should be eminently clear, it’s The Restofus.
    Moving on.
    The Fed system was created by an unknowing and unsuspecting Congress, to the design of the bankers of the day.
    It has long outlasted any purported usefulness, and ought to be dis-established, as provided in the Bill by congressman Dennis Kucinich as HR 2990 of the 112th Congress.

    For the Money System Common.