Is the Federal Reserve a privately owned bank?
- NGC6205Lv 71 decade agoFavorite Answer
The Federal Reserve is INDEPENDENT, but it is NOT privately owned. The Federal Reserve system is setup in accordance with law. Title 12 U.S.C. Chapter 3. http://www.law.cornell.edu/uscode/html/uscode12/us...
The confusion comes about from the way it is structured.
At the top of the system, it is controlled by a Board of Governors. Members of this board are appointed by the President and confirmed by the Senate. The board members serve 14 year staggered terms. The Chairman and Vice-Chairman are appointed to four-year terms subject to the 14-year term limitation. The Board provides overall governance of the system and contributes to setting economic policy.
There are 12 district banks and 25 branches in the Federal Reserve system. The district banks are "banker's banks" and they provide services such as, processing checks and electronic payments, and storing currency and coin. Reserve Banks also supervise commercial banks in their regions. As the bank for the U.S. government, Reserve Banks handle the Treasury's payments and assist with the Treasury's cash management and investment activities. Reserve Banks conduct research on regional, national, and international economic issues.
Each Reserve Bank's board of directors oversees the management and activities of the District bank. Reflecting the diverse interests of each District, these directors contribute local business experience, community involvement, and leadership. The board imparts a private-sector perspective to the Reserve Bank. Each board appoints the president and first vice president of the Reserve Bank, subject to the approval of the Board of Governors. The board of directors of each district bank consists of nine members. Three members of the board are selected directly by the Board of Governors. The other six members are selected by the member banks. Each member bank gets ONE vote per seat regardless of how large or small they are. All members of the board of directors are subject to the approval of the Board of Directors. Also, directors selected by the member banks cannot be an officer or director or employee of any bank. Three of the member bank selected directors are not allowed to be a shareholder in any bank either.
All member banks hold stock in Reserve Banks and receive dividends. Unlike stockholders in a public company, banks cannot sell or trade their Fed stock. The stock confers no rights of ownership beyond the original par value. The amount of stock a member bank is required to subscribe to is set in accordance to law. Banks cannot hold any more or any less than the amount specified in the law. Currently, that amount is set to 3% of the member bank's paid-in capital. If the member bank reduces its paid-in capital, it must surrender its extra shares in the Federal Reserve district bank. It is this "stock" structure that makes it appear that the Federal Reserve is privately owned in reality they are not. There have been a couple of court cases where the Federal Reserve was held to be private for SOME PURPOSES. Critics like to take quotes from those cases out of context. However, they also ignore that the exact same court cases have said, "Federal Reserve district banks have been properly held to be federal instrumentalities for some purposes."
National banks, like Bank of America, N.A., are REQUIRED BY LAW to become member banks in the system. State banks can become member banks if they meet certain requirements. Private individuals, corporations and foreign governments cannot own or subscribe to shares in the Federal Reserve.
BTW, anyone who claims that all income taxes go to the Federal Reserve is simply regurgitating conspiracy theory nonsense. The Federal Reserve holds about $800 billion in U.S. Government debt. In 2006, the Federal Reserve collected about $36.5 billion in interest on that debt. However, the Federal Reserve returned to the U.S. Treasury about $29.1 billion. This can clearly be seen on the INDEPENDENTLY AUDITED financial statements of the Federal Reserve.
Page 21 for the audit report. Page 23 shows the interest income on U.S. Government debt and farther down that same page shows the payment to the U.S. Treasury.
Additionally, the IRS, in 2006, collected a little over $1.04 trillion in individual income taxes alone. Even at the current debt of $9 trillion, the interest rate would have to be over 11.5% in order for all income taxes to only go towards interest on the debt. It is not anywhere near that. In fact, the interest rate on most of the U.S. Government debt is close to 5%.
- gray shadowLv 61 decade ago
The Federal Reserve System is a congressionally-chartered agency like the USPS and NASA. It is organized with a 100% government agency at the top (the Board of Governors), and branches beneath them that resemble corporations but are not.(http://www.federalreserveeducation.org/fed101/stru... )
The Board of Governors are all appointed for 14-year terms by the president and confirmed by congress. It operates per it's charter and laws set by congress. it is overseen by congress. There is no structure or mechanism for private ownership at this level. Board members are forbidden by law to have any economic interest in a private bank. (Ref: Title 12 chapter 3 of the U.S. Legal Code)
- 4 years ago
You clearly do not understand the purpose of the Federal Reserve Bank. Unlike commercial banks in the private sector, e.g., Bank of America, Wells Fargo, etc., the FRB is the US government's place to deposit the monies it receives from taxes, duties, fees, etc., and from which to pay its bills. I recommend you read up on US history, as well as the US Constitution and the Federalist Papers, for additional background information. Heck, check out their website for information.
- The ShadowLv 61 decade ago
No, it is not privately owned. It is part of the federal government.
- How do you think about the answers? You can sign in to vote the answer.
- 1 decade ago
you ask federal reserve,the central bank of us.it is owned by private.i am not sure to say.
- Spock (rhp)Lv 71 decade ago
in theory, it is owned by its member banks.
however, the surplus it runs from its annual operations is given to the US Treasury, so the member banks receive only the nominal dividends it declares.Source(s): ex-banker
- 1 decade ago
Yes it is and your IRS taxes go to it to pay the interest on the money that the US Gov't has borrowed from it. Your income tax dollars never go anywhere else.
- BillParkhurstLv 41 decade ago
Yes it is. Americans should correct this.
- T CLv 61 decade ago
yes it is, but only the Gov can use it.