The solution is ultimately political. In an unprecedented move in March 2008, the New York Fed advanced the funds for JPMorgan Chase Bank to buy investment bank Bear Stearns for pennies on the dollar. By continuing to use this site you agree to the use of cookies. However, owning Reserve Bank stock is quite different from owning stock in a private company. No longer a government by free opinion, no longer a government by conviction and the vote of the majority, but a government by the opinion and duress of a small group of dominant men” [2]. Normally, the Fed swaps green pieces of paper called Federal Reserve Notes for pink pieces of paper called U.S. bonds (the federal government’s I.O.U.s), in order to provide Congress with the dollars it cannot raise through taxes. To unmask this blatant misrepresentation, the late Congressman Louis McFadden, Chairman of the House Banking and Currency Committee in the 1930s, described the Fed in the following words: “Some people think that the Federal Reserve Banks are United States Government institutions. The Federal Reserve system is an imperfect, but rather innovative clearinghouse. . And herein lies ANOTHER MYTH that is created around the Fed: that it is an independent, purely technocratic or disinterested policy-making entity that is solely devoted to national interests, free of all external influences. Ellen Brown, J.D., developed her research skills as an attorney practicing civil litigation in Los Angeles. If the Fed were actually a federal agency, the government could issue U.S. legal tender directly, avoiding an unnecessary interest-bearing debt to private middlemen who create the money out of thin air themselves. The study reveals that, for the first time, middle-income households no longer constitute the majority of American house-holds: “Once in the clear majority, adults in middle-income households in 2015 were matched in number by those in lower- and upper-income households combined.” Specifically, while adults in middle-income households constituted 60.1 percent of total adult population in 1971, they now constitute only 49.9 percent. Also unprecedented was the way the deal was funded. ., the banks and corporations that will grow up around them will deprive the people of all their property until their children will wake up homeless on the continent their fathers conquered” (Thomas Jefferson, 3rd U.S. President). The Federal Reserve was set up in 1913 as a “lender of last resort” to backstop bank runs, following a particularly bad bank panic in 1907. This is extraordinary. www.globalresearch.ca contains copyrighted material the use of which has not always been specifically authorized by the copyright owner. The fact that profit-driven commercial banks and other financial intermediaries are major sources of financial instability is hardly disputed. Among other special benefits, banks and other financial institutions (but not other corporations) can borrow at the low Fed funds rate of about 2%. Perhaps the plan is to swap them with the banks’ dodgy derivatives collateral directly, without actually putting them up for sale to outside buyers. From then until 1913, the United States did not allow the formation of a private central bank. Yahoo Finance reported on September 17: “The Treasury is setting up a temporary financing program at the Fed’s request. This website uses cookies in order to improve your browsing experience. Another MAJOR MYTH associated with the Fed is its purported commitment to national and/or public interest. Tucked into the 451-page bill is a provision that lets the Fed pay interest on the reserves banks are required to hold at the central bank.”3. The Fed is privately owned. These include its name, its ownership, its purported independence form external influences, and its presumed commitment to market stability, economic growth and public interest. Its structure as “independent within government” makes it hard to decipher precisely who owns it. Not long before the establishment of the Federal Reserve Bank in 1913, President William Taft (1909-1913) pledged to veto any legislation that included the formation of a private central bank. copyright owner. There is nothing “federal” about this “system”. The system is nominally controlled by member banks, i.e., all national banks plus some state banks, but real power rests with the board of governors in Washington. Who actually owns the Federal Reserve Central Banks? The Federal Reserve is owned by its member banks, but the Chairman is appointed by Congress. In its latest power play, on October 3, 2008, the Fed acquired the ability to pay interest to its member banks on the reserves the banks maintain at the Fed. The first MAJOR MYTH, accepted by most people in and outside of the United States, is that the Fed is owned by the Federal government, as implied by its name: the Federal Reserve Bank. foster stability in financial markets, and to ensure compliance with applicable laws and regulations. Who owns the Federal Reserve banks? If the Federal Reserve owns more than 15% of America’s debt, it can play it safe and exit at any time, but if they owned, let’s say 50%, their decision to keep this bad investment comes into play. In other words, the Fed’s monetary policy has effectively turned into a means of redistribution from the bottom up. These are banking institutions, trust funds, shareholders, and owners of each of the twelve regional Federal Reserve banks. If the Fed’s money comes ultimately from the taxpayers, that means we the taxpayers are paying interest to the banks on the banks’ own reserves – reserves maintained for their own private profit. The Pew study unambiguously confirms this expropriation of national resource by the financial elites. The choice of the word “Federal” in the name of the bank thus seems to be a deliberate misnomer—designed to create the impression that it is a public entity. Freed from the regulatory constraints of the immediate post-WW II period (which determined the types, quantities and spheres of its investments), the financial sector has effectively turned into a giant casino. The interest on bonds acquired with its newly-issued Federal Reserve Notes pays the Fed’s operating expenses plus a guaranteed 6% return to its banker shareholders. In addition to this guaranteed 6%, the banks will now be getting interest from the taxpayers on their “reserves.” The basic reserve requirement set by the Federal Reserve is 10%. “Independence has really come to mean a central bank that has been captured by Wall Street interests, very large banking interests. The website states: * “The twelve regional Federal Reserve Banks, which were established by Congress as the operating arms of the nation’s central banking system, are organized much like private corporations – possibly leading to some confusion about “ownership.” For example, the Reserve Banks issue shares of stock to member banks. The bonds then become the “reserves” that the banking establishment uses to back its loans. He is also a contributor to Hopeless: Barack Obama and the Politics of Illusion. By the same token as the Fed re-inflates one bubble after another, it also systematically redistributes wealth and income from the bottom up. Except for coins, every dollar in circulation is now created privately as a debt to the Federal Reserve or the banking system it heads.4 The Fed’s website attempts to gloss over its role as chief defender and protector of this private banking club, but let’s take a closer look. The Federal Reserve System has a "unique structure that is both public and private" and is described as "independent within the government" rather than "independent of government". It shows that the pace of the rising inequality has accelerated in the aftermath of the 2008 market implosion, as asset re-inflation since then has gone almost exclusively to oligarchic financial interests. . The Federal Reserve Bank (or simply the Fed), is shrouded in a number of myths and mysteries. . Unlike the U.S. Treasury, which took over Fannie Mae and Freddie Mac the week before, the Fed is not a government-owned agency. You can learn about each Federal Reserve Bank's current board of directors by visiting each Bank's website. Under those circumstances, where financial institutions served largely as conduits that aggregated and funneled national savings to productive investment, financial bubbles were rare, temporary and small. This is no speculation or conspiracy theory: redistributive effects of the Fed policies in favor of the financial oligarchy are backed by undeniable facts and figures. None of its stock is owned by the government. Nobody denies, however, that regardless of the exact words used, he had serious reservations about the formation of the Federal Reserve Bank, and the misguided policy of delegating the nation’s money supply and/or monetary policy to a cabal of private bankers. The Federal Reserve is the cornerstone of the American economy. They seem to believe (or hope) that the likely disturbances from the bursting of one bubble could be offset by creating another bubble! Such was indeed the case in the immediate aftermath of the Great Depression and WW II when the Fed had to follow the guidelines of the Congress, the White House and the Treasury Department. Unlike the risky derivative debt, federal securities are considered “risk-free” for purposes of determining capital requirements, allowing the banks to improve their capital position so they can make new loans. Letter from Chair Powell to Secretary Mnuchin regarding emergency lending facilities Recent Posting - 11/20/2020 . The Centre of Research on Globalization grants permission to cross-post Global Research articles on community internet sites as long the source and copyright are acknowledged together with a hyperlink to the original Global Research article. Indeed, a section or chapter in every college or high school textbook on macroeconomics, money and banking or finance is devoted to the “advantages” of the “independence” of private central banks to determine the “proper” level of money supply, of inflation or of the volume of credit that an economy may need—always equating independence from elected authorities and citizens with independence in general. Not so in the age of finance capital. Ten percent of that is $700 billion. Americans of Modest Means are Draining 401(k)s. What Does Coexistence with Large Carnivores Actually Mean? Why is the Treasury issuing U.S. government bonds (or debt) to fund the Fed, which is itself supposedly “the lender of last resort” created to fund the banks and the federal government? Bob Marshall’s Long-Lost Arguments for Wilderness, Verso Books Wins Voluntary Recognition, Joins the Washington-Baltimore NewsGuild, Siege the Day: QAnon, Trumpist Blockages, and the Logistics of Spiritual Warfare, Why Imperialism is Obsolete in Latin America, Nichole Stephens, Administrative Assistant. How does the Federal Reserve work? It is equally well-known that, due to their economic and political influence, powerful financial interests easily subvert government regulations, thereby periodically reproducing financial instability and economic turbulence. Today, between 35 percent and 40 percent of all consumer spending is appropriated by the financial sector: bankers, insurance companies, non-bank lenders/financiers, bondholders, and the like [5]. The fact that the Fed is committed, first and foremost, to the interests of its shareholders, the commercial banks, explains why its monetary policies are increasingly catered to the benefits of the banking industry and, more generally, the financial oligarchy. to coin money, regulate the value thereof” (Article 1, Section 8, U.S. Constitution). It could also lend money to the government and earn interest, or a fee—money that the government could create free of charge. A) the private commercial banks in each district which are members of the Federal Reserve System B) those households which have purchased stock in Federal Reserve System C) the federal government D) the governments of … Among other benefits to the taxpayers. As we know from watching the business news, “oversight” basically means that Congress gets to see the results when it’s over. The deal was particularly controversial because Jamie Dimon, CEO of JPMorgan, sits on the board of the New York Fed and participated in the secret weekend negotiations.1 In September 2008, the Federal Reserve did something even more unprecedented, when it bought the world’s largest insurance company. The material on this site is distributed without profit to those who have expressed a prior interest in receiving it for research and educational purposes. . Who Owns the Federal Reserve Bank and Why is It Shrouded in Myths and Mysteries? . When the Fed wants to “expand the money supply” (create money), it steps in and buys bonds from these dealers with newly-issued dollars acquired by the Fed for the cost of writing them into an account on a computer screen. The System does not require public funding, and derives its authority and purpose from the Federal Reserve Act, which was passed by Congress in 1913 and is subject to Congressional modification or repeal. They are private monopolies which prey upon the people of these United States for the benefit of themselves and their foreign customers; foreign and domestic speculators and swindlers; and rich and predatory money lenders.” – The Honorable Louis McFadden, Chairman of the House Banking and Currency Committee in the 1930s. Its shareholders are private banks The Fed periodically reports to Congress, but the Fed doesn’t ask; it tells. The idea of bringing the banking industry, national savings and credit allocation under public control or supervision is not necessarily socialistic or ideological. The Associated Press reported: “The Treasury Department, for the first time in its history, said it would begin selling bonds for the Federal Reserve in an effort to help the central bank deal with its unprecedented borrowing needs.”2. In reality, however, 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—pro forma supervision of the Congress notwithstanding. Her term is June 16, 2014 to January 31, 2026. It was this money-creating process that prompted Wright Patman, Chairman of the House Banking and Currency Committee in the 1960s, to call the Federal Reserve “a total money-making machine.” He wrote: “When the Federal Reserve writes a check for a government bond it does exactly what any bank does, it creates money, it created money purely and simply by writing a check.”. The Federal Reserve derives its authority from the Congress, which created the System in … GlobalResearch Center for Research on Globalization. LinkedIn with Background Fact number one: the Federal Reserve System (hereinafter the Fed), although created by Congress, is answerable not to the public but to itself. Its shareholders are private banks. Here is how it works: When the government is short of funds, the Treasury issues bonds and delivers them to bond dealers, which auction them off. The growth of the nation, therefore, and all our activities are in the hands of a few men. J. W. McCallister, an oil industry insider with House of Saud connections, wrote in The Grim Reaper that information he acquired from Saudi bankers cited 80% ownership of the New York Federal Reserve Bank- by far the most powerful Fed branch- by just eight families, four of … Will the World Community Condemn the Murder of Iran’s Nuclear Scientist? The Federal Reserve Banks are not a part of the federal government, but they exist because of an act of Congress. Now, it seems, the government is issuing bonds, not for its own use, but for the use of the Fed! (See E. Brown, “Bailout Bedlam,” webofdebt.com/articles, October 2, 2008.). It is not owned by anyone and is not a private, profit-making institution” [1]. SF’s New DA, Chesa Boudin, Battles Criminal Injustice System on Two Fronts, Open Letter to My Landlord: The Word of the Month is “Renegotiation”, The Planet Cannot Heal Until We Rip the Mask Off the West’s War Machine. These increasingly controversial encroachments on the public purse warrant a closer look at the central banking scheme itself. 3. Notre site en Français: mondialisation.ca, This article was first published by Global Research in October 2008, “Some people think that the Federal Reserve Banks are United States Government institutions. Global Research Owning half of the largest economy’s debt may force the Federal Reserve to either declare bankruptcy or ask to be bought out. 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. The Fed’s website insists that it is not a private corporation, is not operated for profit, and is not funded by Congress. That means we the taxpayers will be paying interest to the banks on at least $700 billion annually – this so that the banks can retain the reserves to accumulate interest on ten times that sum in loans. Is there a solution to the ravages wrought to the economies/societies of the core capitalist countries by the accumulation needs of parasitic finance capital—largely fostered or facilitated by the privately-owned central banks of these countries? Comment on Global Research Articles on our Facebook page, Disclaimer: The contents of this article are of sole responsibility of the author(s). Indeed, misrepresentation of its ownership is not merely by implication or impression created by its name. For just over a century, The Fed has overseen the financial system of the US, but its track record has been far from perfect. This quotation is from Chapter 10 of an online version of the book, which is available at: http://www.marxists.org/archive/hilferding/1910/finkap/ch10.htm. In the same manner that many infrastructural facilities such as public roads, school systems and health facilities are provided and operated as essential public services, so can the supply of credit and financial services be provided on a basic public utility model for both day-to-day business transactions and long-term industrial projects. Margrit Kennedy, Occupy Money: Creating an Economy Where Everybody Wins, Gabriola Island, BC (Canada): New Society Publishers, 2012. We are making such material available to our readers under the provisions of "fair use" in an effort to advance a better understanding of political, economic and social issues. Get 2 Months of Skillshare Pro (Free!) Proxies of the financial oligarchy at the helm of economic policy making no longer seem to be averse to the destabilizing bubbles they help create. BIS is owned by the Federal Reserve, Bank of England, Bank of Italy, Bank of Canada, Swiss National Bank, Nederlandsche Bank, Bundesbank and Bank of France. 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