I don't bother with conspiracy theories when I can avoid them, but today
I went into a coffee place and they had a question posted by a register
for a get it right and save a whole ten cents. I usually know the
correct answer, and I did today. The question was "Which branch is the
Federal Reserve part of?" Obviously it is part of the Administrative
branch. The clerk looked at the answer, and it said that is was
privately owned. I was shocked that they would have that. I thought that
foolishness was straightened out years ago. But apparently there still
are people who don't know that the Fed is an independent agency of the
federal government.
A simple search brings up a number of results that clearly explain that
the Federal Reserve System belongs to the Federal government. The Fed
even turns over its profits to the Treasury Department. But I was
looking for the kind of morons who think that the Fed belongs to the
Rothschilds and Rockefellers. Well a little farther down the page I
found one (http://www.save-a-patriot.org/files/view/whofed.html) that claims that it is a collection of banks controlled by the Rothschilds, etc. Then there's this one: http://www.dailypaul.com/77899/the-p...serve-bank-are
Well, that's more than enough of that idiocy. The Federal Reserve System
was established by the Federal Reserve Act of 1913 and amended a number
of times. Those acts are incorporated in Title 12 of the U. S. Code
(links below (The information at the Fed probably is easier to work
with.). The Chairman of the Fed is appointed by the president and
confirmed by the Senate.
The Federal Reserve System was established for two purposes: for the
clearing of transfers (checks, etc.) and to keep the currency stable.
This was a response to the Panic of 1907 during which most of the
clearing banks went belly-up, and the banking system was all but
insolvent, because there was no “lender of last resort”. If you find
economic systems interesting reading, then read about that panic; it was
horrific. Many people don’t realize that the Fed is the main clearing
bank in the U.S., because it does such a good job that money transfers
are almost invisible. I would prefer if checks were still checks, but
they became EFT’s (Electronic Funds Transfers) several years ago to
speed the system.
The Fed hasn’t been as good at stabilizing the currency. If it did, then
there would be no inflation or deflation, but there is a good reason
for the lack of stability. The Treasury Department issues bonds, bills,
and notes of maturities from one month to thirty years. Thirty year
bonds are repaid with dollars that are worth less than half of the
initial price of the bond due to inflation. Treasury saves money, and
the investors got their money through the interest payments over time,
so they feel that they are compensated.
I have never figured out why some people think that the Federal Reserve
System is privately owned. It serves a public function, and it turns in
its profits to the Treasury. It is an independent agency, but it has to
be rather independent to carry out its functions. Many people (including
me) disagree with how the Fed carries out some of its functions, and
there probably will be more disagreements in the future, because the Fed
has started regulating banks, and that may be a conflict of interest.
After a little more research I think that some people think the Fed is
privately owned, because they never bothered to read the Federal Reserve
Act (Title 12 of the U.S. Code). And they misunderstand the nature of
the capitalization of the regional Federal Reserve Banks. Member banks
are required to deposit as much as fourteen percent of their capital
with the Fed, and the Fed is required to pay six percent annual interest
on that money. (The Fed can and has varied the reserve requirement.) In
some places that money is called “preferred stock”, because, like
preferred stock, the interest is paid before other expenses, but this
preferred stock does not carry any ownership interest with it, as is
true of some preferred stock of businesses; this money is more of a debt
obligation.
After reading the article “10 Things That Every American Should Know
About the Fed” (link below) I understand that the origins of the
conspiracy theories about the Fed are mostly results of ignorance, but
that article had a valid point also. On the other hand, The Fed is
supposed to stabilize the banking system, so it has bailed out some
banks, and that can be spun so that they were helping their friends. If
one holds the delusion that the Fed is privately owned, then many of its
actions look different from how they look when one realizes that the
Fed is an agency of the Federal government.
One of the valid complaints (complaints that I consider valid anyway) is
that they have a revolving door with some of the large financial
companies, so they are regulating companies that belong to their friends
and that will hire them after they leave the Fed. I also disagree with
the bailouts of large banks in 2008 and 2009; those companies should
have been put through bankruptcy just like any other company. The excuse
was that the economy would have been disrupted, but it was disrupted
anyway, and it gave the appearance that the government favors large
companies at the expense of small companies and individuals.
It is completely clear is that the Fed has not communicated effectively
with the citizens. There is no reason why any sane person would think
that the Fed is privately owned, and that fallacy should have been
addressed and put to rest. Unfortunately, many of the people who think
the Fed is privately owned have cognitive problems, so it may be
impossible to completely end that idea.
It is my opinion that the Federal Reserve System should be different,
but it isn’t easy to determine what the Fed should or should not do. For
years Ron Paul tried to get a complete audit of the Fed, but that still
hasn’t happened; although the Fed issues quarterly reports (link below)
that give some idea of what is involved. The Fed has been assigned
additional functions over the years, and not all of the functions are
consistent with each other. It would be a good idea to think carefully
about how the Monetary and banking systems should be organized and
regulated. Someone should be trying to keep the currency stable, and
someone should be regulating banks, and so on. Whether there should be
one or several agencies is a question. The matter of what kind of
currency and who would emit it is also a good question, and there are
several valid answers.
What do you think? What should we do with the Fed? Sell it to the big
banks or keep it as a government agency? Or something else?
Federal Reserve Act
http://www.federalreserve.gov/aboutthefed/fract.htm
Also in Title 12 U.S. Code
http://www.law.cornell.edu/uscode/text/12/chapter-3
10 Things
http://theeconomiccollapseblog.com/a...ederal-reserve
March 2014 Quarterly Report
http://www.federalreserve.gov/moneta...ort_201403.pdf
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