Why doesn't the Federal Reserve Bank offer public stocks?
I have looked into buying stock in the Federal Reserve Bank, but they don't offer any stocks, or at least any public stocks. There are other banks that do this, but why not the Fed? They seem to be a very large bank. Is it illegal for this bank to do this? unconstitutional?
- GiordanoLv 41 decade agoFavorite Answer
It doesn't sell stock publicly because then it would be required by the Securities and Exchange Commission to publish a list of its major shareholders. The Federal Reserve is a PRIVATE CORPORATION that controls the creation and flow of Currency in the U.S. If they had to list their major shareholders, then the American people would know exactly who is to blame for our current economic meltdown and who stands to GAIN from it.
First off, there are certain people who will try to argue that the Fed is not private. Lets remove that lie from the discussion immediately:
The Federal Reserve Bank, a.k.a Federal Reserve System, is a Private Corporation. Black's Law Dictionary defines the "Federal Reserve System" as: "Network of twelve central banks to which most national banks belong and to which state chartered banks may belong. Membership rules require investment of stock and minimum reserves." Privately-owned banks own the stock of the FED. This was explained in more detail in the case of Lewis v. United States, Federal Reporter, 2nd Series, Vol. 680, Pages 1239, 1241 (1982), where the court said: "Each Federal Reserve Bank is a separate corporation owned by commercial banks in its region. The stock-holding commercial banks elect two thirds of each Bank's nine member board of directors".
Also according to Black's Law Dictionary, we find that these privately owned banks actually issue money:
"Federal Reserve Act. Law which created Federal Reserve banks which act as agents in maintaining money reserves, issuing money in the form of bank notes, lending money to banks, and supervising banks. Administered by Federal Reserve Board (q.v.)".
Section 4 of the Federal Reserve Act even designates the Fed as a PRIVATE CORPORATION.
"Upon the filing of such certificate with the Comptroller of the Currency as aforesaid, the said Federal reserve bank shall become a body corporate and as such, and in the name designated in such organization certificate, shall have power—
First. To adopt and use a corporate seal.
Second. To have succession after the approval of this Act until dissolved by Act of Congress or until forfeiture of franchise for violation of law.
Third. To make contracts.
Fourth. To sue and be sued, complain and defend, in any court of law or equity.
So, yes, IT IS PRIVATE.
Some will claim that the Fed is audited by the GOA and is therefore under Government "Supervision." This is a half truth.
The Government Accounting Office does not have complete access to all aspects of the Federal Reserve System. The Federal Banking Agency Audit Act stipulates the following areas are to be excluded from GAO inspections:
(1) transactions for or with a foreign central bank, government of a foreign country, or non-private international financing organization;
(2) deliberations, decisions, or actions on monetary policy matters, including discount window operations, reserves of member banks, securities credit, interest on deposits, open market operations;
(3) transactions made under the direction of the Federal Open Market Committee; or
(4) a part of a discussion or communication among or between members of the Board of Governors and officers and employees of the Federal Reserve System related to items.
NGC and Bob both claim that the Fed "MAKES NO PROFIT" and pays dividends back to the Treasury. The fact is, THERE IS NO WAY TO KNOW EXACTLY HOW MUCH THE FED CHARGES. As their own rules state:
"Transactions for or with a foreign central bank, government of a foreign country, or non-private international financing organization;" AND "reserves of member banks, securities credit, interest on deposits, open market operations;" AND
"transactions made under the direction of the Federal Open Market Committee" are all exempt from ANY Government Audit.
The Fed says it pays dividends back to the treasury "after expenses......"
THERE IS ABSOLUTELY NO WAY TO KNOW WHAT EXPENSES THEY ARE CHARGING FOR WITHOUT A FULL AUDIT. PERIOD!
What we do know, is that the Federal Reserve creates massive debt through inflation and other practices including FRACTIONAL BANKING.
Even the Federal Reserve publication "How Banks Create Money" asserts: "Banks actually create money when they lend it. Here's how it works: Most of a bank's loans are made to its own customers and are deposited in their checking accounts. Because the loan becomes a new deposit, just like a paycheck does, the bank once again holds a small percentage of that new amount in reserve and again lends the remainder to someone else, repeating the money-creation process many times."
Fractional Banking creates unaccountable inflation, which destroys the value of the dollar. They have also since 1963 created a 9 Trillion dollar National Debt by charging interest on every dollar they print:
"Congress authorizes the F.R. to purchase U.S.Notes from the U.S. Bureau of Engraving for 2.5 cents per bill (no difference between $1 and $1000 bills). The F.R. then issues an equal amount of "debt certificate" Federal Reserve Notes which they use to purchase U.S. Treasury Bonds. Taxpayers are, supposedly, obligated to pay off these bonds at FULL FACE VALUE, plus the debt of the original currency purchased at 2.5 cents per bill!"
Why not have the Treasury do the same job without the Middleman and the volatile debt of the Federal Reserve?
Some people will say (mostly Fed apologists and Tax agents) that none of this dirty business matters and quote the Federal Reserve Website which claims that the Senate and the President appoint a "Board of Governors" to oversee Fed Operations. This is also a Half Truth.
The Federal Reserve Website is disingenuous when explaining its own structure. For instance, Candidates for the Board of Governors are put on a "recommendations list" by the Fed's Board of Directors. 6 out of 9 of these directors are selected by the Fed itself. This list is then given to the Senate and the President, and THEN he chooses members of the board, so in reality, it is the Fed who chooses who is on the Board of Governors. The Board of Governors is almost always made up of Bank CEO's, or Corporate CEO's, which leaves it wide open to corruption, and the Board provides little or no REAL oversite to the Fed, which was obvious in the Fed bailout of Bear-Stearns with public Tax dollars.
So, as you can see, it is in the best interests of the private corporations that run the Fed to keep their identities a secret, and not trade Stocks publicly. Otherwise, they would be subject to public scrutiny and soon the Federal Reserve would not exist.
Second, the GOA audits were limited at THE FEDERAL RESERVES REQUEST. It has nothing to do with political influence and I'm not sure where your getting that from. In any case, the GOA has little oversight, and the word "Federal" is in "Federal Reserve" too, but it is still a private corporation as Section 4 of the Federal Reserve Act states.
Third, yes, it does charge interest, but in a very sneaky way:
"With two-thirds of everyone's personal income taxes wasted or not collected, 100% of what is collected is absorbed solely by interest on the Federal Government contributions to transfer payments. In other words, all individual income tax revenues are gone before one nickel is spent on the services which taxpayers expect from their government."
President's Private Sector Survey On Cost Control
A Report to The President (Reagan)
"The Federal Reserve Act of 1913 provided that a substantial portion of the Feds annual profits be turned over to the National Treasury. Does this fact dilute the argument that there are vast profits built into the commercial banking system? No. Consider for a moment that the total debt (public debt plus private debt) at the end of 1988 was in excess of $11 trillion. [Editorial note: Today it is in excess of $23 trillion.] Then, the discount rate, the rate at which banks can borrow from the Federal Reserve, was about 9.4%. Assuming the debt carried the same rate as the discount rate, there was an annual interest charge of almost $1 trillion on the total debt owed to the banking system.
While all of this interest payment does not go to commercial banks, an overwhelmingly large part of it does. The $17.36 billion turned over to the U.S. Treasury is thus much less than 2% of the total carrying charge on the total debt. which they created out of thin air."
RE: All you've done so far is argue the semantics of the legal language of the sources I cited. Sources which are actually crystal clear. Yes, they do charge interest to the American people because they treat the creation of currency AS A LOAN. What about this do you not understand? Where do you think our 9 Trillion Dollar National Debt came from? They don't teach the truth about the Fed in University Economics classes. Those people are just as indoctrinated as you. Your sources OMIT facts to protect the Fed, as I have shown. Btw, OF COURSE Devvy Kidd is a tax protester, anyone who learns the truth about the Fed is.Source(s): http://www.fdrs.org/money_creation.html http://www.bankrate.com/brm/news/fed/fedwatch.asp http://query.nytimes.com/mem/archive-free/pdf?_r=3... http://www.neithercorp.us/nforum/serious_videos/mo...
- Anonymous4 years ago
The Federal Reserve does not sell stocks, but it does buy and sell government bonds to manipulate the amount of money in the economy. The Federal Reserve BANKS are owned by their member banks, so in a sense they are a private company. But the Federal Reserve SYSTEM is part of the Federal Government.
- TedLv 71 decade ago
There isn't a "the Federal Reserve Bank".
There are 12 district banks, such as The Federal Reserve Bank of Cleveland". Each one is owned by the banks in the district. They don't make any money. Anything they get in fees or interest above what it costs to operate and pay the stated dividend, is turned over to the US Treasury.
- lil' autarchLv 61 decade ago
Take a dollar bill out of your pocket. See there printed on it, "Federal Reserve Note"? It isn't backed by anything material, like gold or silver. It's a bill of credit. Right there is your stock in the Federal Reserve.Source(s): U.S. Constitution, Article 1 Section 10: "No State shall [... ] make any Thing but gold and silver Coin a Tender in Payment of Debts; [...]"
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- 1 decade ago
They are a lender of last resort. Not a publicly traded company. The Fed controlls much of the economy for the US through rate cuts, hikes and volume of currency control. Take an Econ class.
- 1 decade ago
The Federal reserve is as "Federal" as Federal Express!
In fact a couple of years ago they indeed did sell shares to the public. Other than that, and since I am new, and cannot vote yet, I must agree with Giordano!!
- SerendipityLv 41 decade ago
The Federal Reserve is a Sham! Big Business OWNS our Government, our Country and all the inhabitants!
"How fortunate for governments that the people ...don't think."
- NGC6205Lv 71 decade ago
The stock of the Federal Reserve district banks are not sold or traded because the stock is different from other corporate stock.
Basically, the stock is used as a way to administer membership in the Federal Reserve system. National banks are required by law to become members of the Federal Reserve system. State banks may become members if they meet certain requirements. Private individuals, corporations (other than banks), foreign banks, and foreign governments are not allowed by law to hold stock in Federal Reserve district banks. A bank becomes a member of the system by subscribing to an amount of Federal Reserve district bank stock that is equal to 3% of their paid-in capital. The shares confer no rights of ownership beyond the par value and an annual 6% dividend. If a Federal Reserve district bank were to be dissolved, the member banks would be paid the original amount of their shares plus any unpaid dividend. All other assets of the bank would become the property and responsibility of the U.S. Government. All of this can be confirmed by reading the law covering the Federal Reserve system which is 12 USC Chapter 3.
BTW, to verify what another poster said about earnings being paid to the U.S. Treasury, you can look at the independently audited financial statements of the Federal Reserve district banks. Once the district banks have paid all expenses and the 6% dividend to the member banks, and made the surplus fund equal to the stock subscriptions, all other earnings are paid to the U.S. Treasury. In 2007, the Federal Reserve district banks earned $40.9 billion in income and paid to the U.S. Treasury $34.6 billion.
EDIT: There are a lot of misconceptions about the Federal Reserve.
Re: The Federal Reserve is private.
Sort of. The Federal Reserve SYSTEM is setup by law to be INDEPENDENT. It should be noted that most central banks of major industrialized countries are setup to be independent to lessen political tinkering with economies. The description of Federal Reserve district bank stock and subscription to that stock matches the definition from Black's law dictionary. However, that definition does NOT state the district banks are private. Second, Lewis v. United States declared the banks to be private entities for the purpose of the Federal Tort Claims Act. In that case, Lewis was injured by a vehicle owned and operated by one of the Federal Reserve district banks. Since there is a section in the Federal Reserve act covering tort claims against the banks, it is proper that the banks be treated as private entities for the FTCA. It should be noted that the same court IN THE SAME CASE stated that "The Reserve Banks have properly been held to be federal instrumentalities for some purposes" and continues on to list many instances where the banks have been held to be federal instrumentalities.
First, AS REQUIRED BY LAW, the Federal Reserve is required to submit INDEPENDENT AUDITS in its annual reports to Congress. These independent audits are full audits. If they were not full audits, the auditing firms would not attach the cover letters they do. An accountant would know this fact. There are no limitations to these audits.
Second, the GAO is limited in its audits to limit political influence, however, the GAO does perform extensive audits of the system. The GAO audits were not limited by request of the Federal Reserve. In fact, the 1978 Federal Banking Agency Audit Act INCREASED the oversight of the Federal Reserve by the GAO. These are also included as part of the Federal Reserve's annual reports to Congress.
Certain transactions may be exempt from a GAO audit, but they are not exempt from the annual independent audit. If transactions were exempted from the independent audits, the audit firms would be required by law to state that in their audit reports. An accountant would know this.
Comments about the creation of money and how it works are taken out of context and show some people don't understand exactly how it all works. I don't have the space here to explain it all fully. However, I will state that the Federal Reserve DOES NOT CHARGE INTEREST on every dollar. If that were the case, printed federal reserve notes would be ASSETS on the books of the Federal Reserve. They are not. In fact, federal reserve notes are properly classifed as LIABILITIES of the Federal Reserve. Take a money and banking course at a decent university to learn more about it.
Re: Board of Governors
I see there is some confusion about the Board of GOVERNORS and the Board of DIRECTORS. The Board of GOVERNORS has SEVEN members. As REQUIRED BY LAW, "No member of the Board of Governors of the Federal Reserve System shall be an officer or director of any bank, banking institution, trust company, or Federal Reserve bank or hold stock in any bank, banking institution, or trust company...". Additionally, "The members of the Board shall be ineligible during the time they are in office and for two years thereafter to hold any office, position, or employment in any member bank."
Contrary to belief, the President does not choose these governors from a list of recommendations by the district or member banks.
The Board of DIRECTORS of a Federal Reserve district bank are selected differently. First, each member bank may nominate TWO people to serve on the board of directors of each district bank. One of those two may not be an officer or director or employee of any bank. Each member bank gets ONE vote per seat and the member banks select six of the nine directors. The Board of Governors selects the other three members of a district bank's Board of Directors and those three members may not be officers, directors, employees or hold stock in any bank.
EDIT: Re: Board of Governors
First, what I said was correct and in accordance to law. Second, of the current Board of Governors, only one worked in the private sector and that was more than six years ago. All of the others were economic advisers and college professors.
Re: Grace commission report
First, The Grace commission report doesn't say what you think or claim it does. Second, the report was performed more than 20 years ago. At the time of the report, the interest on the debt was much higher than it is now. The interest rate in the early 80s was 11 to 12%. Currently, it is about 5%. Also, income tax revenues were much lower and enforcement was much more sporadic. The Grace commission also said that a good portion of the income tax revenue was WASTED. What the commission also said was that what was left after waste went to the interest on the debt. They did NOT say that it all went to the Federal Reserve. The Federal Reserve only holds a small portion of the government debt anyway. Now, if a person looks at current data, they can clearly see that the Grace commission conclusion is no longer true. A careful look at expenditures will show that taxes other than individual income taxes don't even come close to covering all expenses of the government. I don't have the space here to point it all out to you. But here are some links.
Re: Devvy Kidd's article
Another person who doesn't understand money and banking. Of course commercial banks are out to make a profit, but that doesn't mean that all income tax revenue goes to those banks. What it does mean is that when private individuals borrow money for a car, house or anything else, the banks earn interest from the PRIVATE individual or business. That is separate from the income tax revenue. In any case, interest revenue is REVENUE to the loaning institution. That revenue will be found listed on the loaning institution's financial statements. An accountant would know this.
EDIT: Giordano, you said that all income tax revenue goes to pay interest on the debt. I linked to verifiable numbers that show that is not the case. You are mixing facts up because you don't understand them. The Fed DOES NOT treat the creation of PRINTED currency as a loan. If that were the case, Federal Reserve notes would be an ASSET on the financial statements of the Federal Reserve and in reality they are a LIABILITY. Now, when a bank does make a loan to an individual or business, that does increase the M2 money supply, but it is false to say that every dollar in the economy is earning interest for the Federal Reserve because it doesn't. Additionally, most loans are through commercial banks and not the Federal Reserve. The Federal Reserve is the lender of last resort for the commercial banks and it does not do individual or commercial loans. The 9 trillion dollar debt comes from the government spending more money than it gets in revenue. AS I STATED, the government borrows money by issuing securities which are sold at auction and anyone can by these securities, even you. The Federal Reserve holds only a small amount of these securities and AS I STATED and IN ACCORDANCE TO LAW, the Federal Reserve is required to return most of the interest it earns on those securities to the U.S. Treasury. You may call that semantics, but the simple fact is it is the truth.