1. Read this excerpt from WHGDTOM:
"Central Banks are often nominally owned by privateindividuals or, as in the United States, jointly by private banks; but they are always directed by government appointedofficials, and serve as arms of the government. Where they are privately owned, as in the original Bank ofEngland or the Second Bank of the United States, their prospective profits add to the usual governmental desire forinflation." -p. (68)
2. First off, what is there even to own in the Federal Reserve?
I can think of just the physical building in DC, the office supplies + furniture inside it, and the contracts of the employees (Ben and his crew).
Last I checked, the government owned those things...So what the hell is Rothbard talking about here?!
Exactly. The Fed is supposed to be both boring and confusing to the casual observer. Here is yet another example of that.
Here's a question that if answered may help you with your query:
Who's signature is on the Fed's employee's paychecks?
"Every civilization depends on the quality of individuals it produces. If you over-organize humans, over-legalize them, suppress their urge to greatness-they cannot work and their civilization collapses." -Frank Herbert, from Children of Dune
Uhm, Second Bank of the United States? That was back in Andrew Jackson's time, yes?
If you find something evil that wobbles, push it. - Gary North
Stilbjorn: OK. Who signs their paycheques?
Libertystudent: I'm not sure why you are asking that
It has shareholders, does it not?
-Jon
To darkness I condemn you...
Because it is privately owned? The Federal Reserve is made of its member banks. From the Fed website:
Who owns the Federal Reserve?The Federal Reserve System is not "owned" by anyone and is not a private, profit-making institution. Instead, it is an independent entity within the government, having both public purposes and private aspects. As the nation's central bank, the Federal Reserve derives its authority from the U.S. Congress. It is considered an independent central bank because its decisions do not have to be ratified by the President or anyone else in the executive or legislative branch of government, it does not receive funding appropriated by 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 Congress, which periodically reviews its activities and can alter its responsibilities by statute. Also, the Federal Reserve must work within the framework of the overall objectives of economic and financial policy established by the government. Therefore, the Federal Reserve can be more accurately described as "independent within the government." 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. 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.
As the nation's central bank, the Federal Reserve derives its authority from the U.S. Congress. It is considered an independent central bank because its decisions do not have to be ratified by the President or anyone else in the executive or legislative branch of government, it does not receive funding appropriated by 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 Congress, which periodically reviews its activities and can alter its responsibilities by statute. Also, the Federal Reserve must work within the framework of the overall objectives of economic and financial policy established by the government. Therefore, the Federal Reserve can be more accurately described as "independent within the government."
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. 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.
and
Are the Federal Reserve Banks private companies?The Federal Reserve Banks, created by an act of Congress in 1913, are operated in the public interest rather than for profit or to benefit any private group. Commercial banks that are members of the Federal Reserve System hold stock in the Reserve Bank in their region, but they do not exercise control over the Reserve Bank or the Federal Reserve System. Holding stock in a regional Reserve Bank does not carry with it the kind of control and financial interest that holding publicly traded stock affords, and the stock may not be sold or traded. Member banks do, however, receive a fixed 6 percent dividend annually on their stock and elect six of the nine members of the Reserve Bank's board of directors. Although they are set up like private corporations and member banks hold their stock, the Federal Reserve Banks owe their existence to an act of Congress and have a mandate to serve the public. Therefore, they are not really "private" companies, but rather are "owned" by the citizens of the United States.
Commercial banks that are members of the Federal Reserve System hold stock in the Reserve Bank in their region, but they do not exercise control over the Reserve Bank or the Federal Reserve System. Holding stock in a regional Reserve Bank does not carry with it the kind of control and financial interest that holding publicly traded stock affords, and the stock may not be sold or traded. Member banks do, however, receive a fixed 6 percent dividend annually on their stock and elect six of the nine members of the Reserve Bank's board of directors.
Although they are set up like private corporations and member banks hold their stock, the Federal Reserve Banks owe their existence to an act of Congress and have a mandate to serve the public. Therefore, they are not really "private" companies, but rather are "owned" by the citizens of the United States.
This is what I wrote in a different thread:
The Federal Reserve is a government agency. It was created by government. It operates on behalf of the government (as well as their private member banks and other cronies). It's more correct to call it a hybrid institution. However, one can think of all government institutions as private--in a sense they are, they just have a different business model and organizational structure, and are imposed by the barrel of a gun, working in the guise of "the public interest" or whatnot.
The Second Bank of the United States was completely privately, I say was because it lost its Federal charter in 1836 and shut down in 1841.The Federal Reserve (actually, there are 12 Federal Reserve banks) is mostly owned by large private banks, but it is run by a board of governors who are appointed by the U.S. president.
Laissez faire et laissez passer, le monde va de lui même
Wren: thanks for info. But first off, to say that something is "privately owned" is quite different than if it's actually just a "hybrid-government-private agency."
Secondly, why the hell does there even exist these 12 regional Fed banks? Can't the Fed out of it's D.C. office take care of the (a) lender of last resort and (b) monetary policy functions?
Third, what is the point of the private banks being forced to buy stock in these Regional Fed banks? If it can't be traded or sold what the heck is the point? Usually stocks are sold by a company to raise capital...however the Fed people don't need to do that--they can just print out of thing air...
Angurse: I find that hard to believe. If it was completely private, how would it fulfill the role of lender of last resort? Did the politicians allow it to create US legal-tender paper notes out of thin air? I would strongly doubt that it did...
In America's Great Depression by Murray Rothbard, he says on page 29 in a footnote:
30 Some writers make a great to-do over the legal fiction that the FederalReserve System is “owned” by its member banks. In practice, this simply meansthat these banks are taxed to help pay for the support of the Federal Reserve. Ifthe private banks really “own” the Fed, then how can its officials be appointed bythe government, and the “owners” compelled to “own” the Federal ReserveBoard by force of government statute? The Federal Reserve Banks should simplybe regarded as governmental agencies.
atrickpay:Angurse: I find that hard to believe. If it was completely private, how would it fulfill the role of lender of last resort? Did the politicians allow it to create US legal-tender paper notes out of thin air? I would strongly doubt that it did...
Yes. Create legal tender notes, and charge interest on them!
the Federal Reserve is entirely owned by private banks. It was created by the Money Trust in 1913, and remains owned by the money trust. G. Edward Griffin's "Creature from Jekyll Island" proves quite comprehensibly that the Fed is a privately owned institution
and the governers and chairmen that the President "chooses" are all taken from a small list that the President is given in the first place, whose listings all contain people well connected with the private banks, there's virtually no real "choosing" of any sort
gGopenhaver: thx for that. That's the best answer I've gotten so far!
But, why does the government even require that banks buy shares (a "tax" as Rothbard calls it) in the Fed Regional banks? It seems completely redundant to me.
Companies issue shares to raise capital. What do these Fed Regional banks need to raise capital for??
Libertystudent: if the politicians allowed it to create governmental legal-tender notes how can that be called 'completely private'?
I don't see how it could...
Diogenes: I have Griffin's book but have not read it yet. What specifically and exactly does GEG say that the private banks own of the Federal Reserve? The buildings? The office furniture? The office supplies? Or something else?
atrickpay:Libertystudent: if the politicians allowed it to create governmental legal-tender notes how can that be called 'completely private'? I don't see how it could...
Then I can't help you. Its pretty clear.
Although I think it is a waste of time talking about whether or not the FED is private.
What matters is that they fractionally bank, and create money out of thin air, then lend it to the American people at interest.
It's been mentioned many times by Austrians that pursuing the private/public path only contributes to conspiracy, not education.
Libertystudent: Is not being able to create governmental legal-tender notes a huge governmental privilege? How can that be called a completely private enterprise? Rather, wouldn't that be called corporatism?
liberty student:It's been mentioned many times by Austrians that pursuing the private/public path only contributes to conspiracy, not education.
Exactly. That is why I'm trying to figure this out. I want to dispel the myths.
atrickpay:Exactly. That is why I'm trying to figure this out. I want to dispel the myths.
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