Tuesday, May 22, 2012

To all thiose who still think the Fed is a private corporation

For those who still think the Fed is a private corporation independent of government, there is this, today:

May 22 (Bloomberg) -- U.S. Senators Bernie Sanders, Barbara Boxer and Mark Begich plan to introduce legislation today that would remove banking industry executives from the 12 regional Fed banks’ boards of directors. “Allowing currently employed banking industry executives to serve as directors on the boards of directors of Federal Reserve banks is a clear conflict of interest that must be eliminated,” according to the text of the bill, released today by Sanders, a Vermont Independent who caucuses with Democrats.

So, Congress, i.e. GOVERNMENT, can remove executives of the Fed. Wow. Who'da thought?

This myth will likely never go away, but I'm happy to provide more facts to highlight its absurdity. It is still very popular among "hard money" types and conspiracy theorists of all stripes. The Fed is compelled to hand over virtually all of its profits to the U.S. government. I don't know of any private business that is forced to do that and certainly not an institution with the purported, vast powers granted to it by these conspiracy kooks. Then there's the fact that the Fed's board members are nominated by the President and confirmed by Congress and they all have terms that expire including the Chairman's term. Finally, the Fed itself was created by an act of Congress.

I guess everyone's entitled to their beliefs so if you're into alien abductions, Bigfoot and the Loch Ness monster, feel free to add the private Fed to your list. Go ahead...knock yourself out!


Anonymous said...

It's actually only the "Board of Governors of the Federal Reserve System" which is "an independent agency of the Federal Government" (seven people and their staff - numbered in the thousands, I think).

The regional Federal Reserve Banks are "owned" by their stockholders (banks), but are also classed as "instrumentalities" of the Federal Government, meaning that by and large they have to do what Congress or the Board of Governors tells them to do (i.e. carry out monetary policy as determined by the Board).

They have to submit a fraction of their capital to the Bank in return for stock in the regional Federal Reserve Bank, and a chance to elect members to regional Bank boards.

They also receive a statutory dividend of 6% on their capital "investment" in the Bank.

They don't keep the Federal Reserve's overall "profits" (dividends to member banks are not classed as profits!), but at the same time the system functions to serve and support them and the financial system as a whole.

Mark Plus said...

I'd like to see a better educational effort to combat this anti-Fed nonsense. I walked out of a friend's talk at a conference today when I realized that he followed the standard conspiracy theory script about the Fed. He lost me when he said that the Fed's bankers arranged things so that the Fed would never get audited.

Uh, what do you call this document?