.How to fool the public into thinking that the Federal Reserve Bank is a government entity: name it: “Federal Reserve Bank.”
One of many falsities and frauds perpetrated by the government.
.4ltr
Don’t be ridiculous. Your article is pure and total, unadulterated hogwash.
The Federal Reserve System Board of Governors is a FEDERAL AGENCY created by FEDERAL LAW. All 7 members of the Board are nominated by the President and confirmed by the Senate.
The System BoG formulates monetary policy. The System BoG is where reserve requirements are set, where the discount rate is set, and where rules and regulations are adopted.
The 7 System BoG members are a PERMANENT MAJORITY of the 12 member Federal Open Market Committee, the other 5 rotating voting members being regional bank presidents, elected by the member bank “shareholders.”
The Chairman of the System BoG is also the Chairman of the FOMC.
The FOMC implements System BoG monetary policy. The FOMC is where fed funds target rates are set, where margin rates are set, and is responsible for open market operations to carry out policy.
The System BoG and the FOMC are where ALL of the actual power of the Fed resides.
The boards of the regional banks can suggest changes in the discount rate, but the System BoG must approve them or nothing happens.
Other than that, the primary function of the regional Fed banks is to provide services like check clearing and FedWire to member banks. ACH and such. They do the scut work and a lot of research, and their presidents give speeches.
Nobody with any clue claims that “the Fed” is private, it’s a 100% GOVERNMENT-CONTROLLED operation, member bank “shares” in the regional Fed banks notwithstanding.
Now, don’t get me wrong, I dislike the Fed because it’s nothing but central government tinkering with economic policy via monetary policy and they usually get things wrong.
I do not, however, subscribe to laughable conspiracy theories and non-factual rubbish cooked up by people who don’t know what they’re talking about.
The Fed was created to prevent periodic financial runs and panics and other financial chaos. I think they do a horrible job, but that’s just the usual unintended consequences of any government activity and whether “the Fed” is a net benefit or detriment is open to debate. What’s not debatable is whether the Fed is private.
It ain’t.
Now, what about those “shares” that Fed member banks own in the 12 regional Federal Reserve banks?
Here are 14 key differences between the regional Fed bank “shares” and actual shares of REAL common stock in the REAL private world that will disabuse anyone of any doubt:
1) If you want to buy shares of any public company (makes no difference which one, I’ll call it XYZ hereafter) you may buy any amount you wish. The “shares” Fed member banks MUST buy is equal to 6% (3% in cash, 3% on-call) of their paid-in capital and retained earnings. BY STATUTE.
2) If you own shares of XYZ, you will never be required by anyone to buy more for any reason. As Fed member banks’ capital increases, they are required to purchase more Fed regional bank “shares.” BY STATUTE.
3) You buy XYZ shares through a private market like the NYSE or NASDAQ. Not from the government. Whether using a live human broker or an on-line securities account, you simply buy them. You don’t fill out an application to the Federal Reserve as prospective Fed member banks must do, BY STATUTE.
4) You buy your XYZ shares from some (unknown) individual or institution. Not from the government, as Fed member banks must, BY STATUTE.
5) When you want to sell XYZ shares you use the same private markets you used to purchase them, and do so whenever you wish. Fed member banks can only sell their “shares” back to their regional Fed bank (the government) when they cease to be a member bank. BY STATUTE.
6) You can pledge your XYZ shares as collateral on a loan at anytime you wish. No member bank can pledge or hypothecate its regional Fed bank “shares” under any circumstances, BY STATUTE.
7) An owner of XYZ shares can generally vote on all issues that are put to a shareholder vote. Regional Fed bank “shares” entitle a member bank to vote for 6 of the 9 members of its regional bank’s Board of Directors. That’s it. BY STATUTE.
8) An owner of XYZ shares generally gets one vote for each share. Member banks holding regional Fed bank “shares” get one vote, period, no matter how many “shares” they own. BY STATUTE.
9) Candidates for XYZ’s Board of Directors are nominated by XYZ or its shareholders in accordance with its by-laws, and are then voted on by shareholders. The Fed’s Board of Governors are nominated by the President and confirmed by the Senate and neither Fed member banks nor their 12 elected regional bank Boards of Directors have anything whatsoever to say about it. BY STATUTE.
10) If XYZ’s Board of Directors decides that they want to change the dividend payable to shareholders they can generally do so at anytime they wish. The 6% “dividend” on Fed regional bank “shares” is set BY STATUTE.
11) If XYZ wants to amend its corporate by-laws, it can generally do so at anytime with the approval of a majority of shareholders. BY STATUTE, no regional Fed bank can amend its charter, EVER.
12) XYZ is a for-profit private enterprise, and they may generally do whatever they wish with any after-tax profits. The Fed regional banks must turn over 100% of their operating income (after their mandatory 6% “dividend”) to the US Treasury each year. BY STATUTE.
13) As time goes on, the value of XYZ shares will fluctuate, perhaps widely. The value of each member bank’s regional Fed bank “shares” is fixed at $100. BY STATUTE.
14) If XYZ is liquidated, your shares will generally entitle you to your relative proportion of assets left (if any) after all creditors of XYZ have been paid. Fed regional bank “shares” entitle member banks to exactly ZERO Fed assets under any and all circumstances. BY STATUTE.
The reality is that regional Fed bank “shares” are nothing more than a semi-permanent deposit of capital by another name.
The use of the word “share” is very narrowly technically correct as these quasi-government entities were formed as corporations which issue shares, as do all corporations.
The problem with that is that it gave rise to conspiracy theories galore propagated by people (many mentioned on this silly thread, e.g. Griffin) who know little or nothing about the Fed, banking, government, law or economics, but focus laser-like on the single word “shares.”
The Fed is not privately owned and never has been, regional Fed bank “shares” notwithstanding.
For good or ill, it’s a 100% government-controlled operation.
There’s no conspiracy, it just is what it is. If government was smarter, they never would have used the word “shares” in the enacting legislation for the Fed system and just called it “mandatory capital contributions” or something similar.
It would have avoided a lot of meaningless baloney and conspiracy garbage. Not to mention idiotic threads like this.
The Fed is a mixed institution. As for a truly private bank, try the First Bank of the United States (1791-1811), created by the founder of American conservatism, Alexander Hamilton, and signed into law by George Washington.
Yet one more crackpot article that will tickle the itching ears of those who love conspiracy theories.
The Federal Reserve is THE reason for the slow march of Socialism in the U.S. Its through the debt/currency that the LEFTISTS in the US are able to fund the ever expansion of government!!! Until the majority of Conservatives realize this and FORCE the government to either dismantle the Federal Reserve or allow a competing currency (allowable to settle ALL payments both private and public including taxes) then we will NEVER be able to defeat the Leftists, Marxists, Socialists, Communists that have taken over academia, Hollywood, Big Business, Industrial Military Complex, etc....WAKE UP Folks!! Wake UP! Read: The Creature from Jekyll Island by G. Edward Griffin
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Ok, then why is a private company allowed to determine interest rates?
Why would their chairman be chosen by POTUS?
What other private company allows that?