I was having a conversation the other night about the nature of our monetary system and the structure of the Federal Reserve. He was surprised when I revealed that the Federal Reserve was not truly a government organization and that it as owned by interest outside our government. It is difficult for most people to get their heads around this concept or accept that it is even true. In fact is the Fed is a public / private hybrid organization. Here is a quote from the Fed’s website:
The Federal Reserve System is not “owned” by anyone. Although parts of the Federal Reserve System share some characteristics with private-sector entities, the Federal Reserve was established to serve the public interest.
Some observers mistakenly consider the Federal Reserve to be a private entity because the Reserve Banks are organized similarly to private corporations. For instance, each of the 12 Reserve Banks operates within its own particular geographic area, or District, of the United States, and each is separately incorporated and has its own board of directors. Commercial banks that are members of the Federal Reserve System hold stock in their District’s Reserve Bank. 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. In fact, the Reserve Banks are required by law to transfer net earnings to the U.S. Treasury, after providing for all necessary expenses of the Reserve Banks, legally required dividend payments, and maintaining a limited balance in a surplus fund.
It can still be a little difficult to fully grasp this extraordinary statement.The website for the St. Louis Federal Reserve Bank, answers this question in plain speak.
The Federal Reserve Banks are not a part of the federal government, but they exist because of an act of Congress. Their purpose is to serve the public. So is the Fed private or public?
The answer is both. While the Board of Governors is an independent government agency, the Federal Reserve Banks are set up like private corporations. Member banks hold stock in the Federal Reserve Banks and earn dividends. Holding this stock does not carry with it the control and financial interest given to holders of common stock in for-profit organizations. The stock may not be sold or pledged as collateral for loans. Member banks also appoint six of the nine members of each Bank’s board of directors.
So the simple answer to our question is that commercial banks such as JP Morgan Chase, Bank of America, and Citibank ultimately own the Federal Reserve. It is not owned by the United States public .
It is not my purpose in this article to pass judgment or the merits of this structure. Only to clarify a widely held misbelief that the Fed is a public government institution. It is not.
If you wish to learn more about the implications of the system, I recommend the following video by Rep. Ron Paul:
If you have about 30 minutes to spare to further understand our monetary system, check out this video :