is this true?If not please elaborate?

Question

Am I mistaking that when the Federal Reserve Act was passed (on Christmas Eve) in 1913, it transferred the power to coin and issue our nations money and to regulate the value thereof from Congress to a Private corporation. And my country now borrows what should be our own money from the Federal Reserve (a private corporation) plus interest. Is that correct and the debt can never be paid off under the current money system of country

Answer 1

To answer question properly, we need to break it down.


Q. Is the Federal Reserve System a private corporation?

A. No, the system is managed and overseen by government officials. However there is some semblence at the branch level.

To elaborate: At the top of the Federal Reserve System is the Board of Governors. These 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 also overseen by congress. There is absolutely no structure or mechanism for private ownership at this level. (If someone disagrees, please explain how someone could take legal title to own and control the Board of Governors).

The 12 branches, however, are organized similar to private corporations. Member banks are required to buy shares in their branch. They can vote for 6 of their 9 board members. The shares get a standard 6% dividend. The shares cannot be sold on the open market. All 'profit' from the Federal Reserve branches are turned over to the Treasury at the end of the year. Whether this branch structure constitutes 'private ownership' is the subject of much debate. Even the courts have a hard time with making the distinction in related decisions. I personally equate it to contracting out; the Board of Governors has oversight and ultimate responsibility but the branch work is carried out by this contrived joint partnership arrangement of member banks.


Q. Does the FRS have the power to coin money?

A. No, all minting and printing of money is performed by the Mint and Bureau of Engraving.


Q. Does the FRS have the power to order the printing of money?

A. No, only the Treasury is authorized to make that request. The connection is that the Federal Reserve forecasts it's currency needs and submits a request to the Treasury. The Treasury reviews and approves the requests and forwards it on.


Q. Does Treasury borrow money from the FRS?

A. Not directly. The Treasury sells Securities on the open market or to other government agencies (like Social Security).

The FRS will buy/sell T-Notes on the Open Market (i.e. from the public, not the Treasury). About $700B of the $10T in Treasury Notes are owned by the FRS.


Q. What about the Interest

A. All 'profit' from the Federal Reserve (mainly T-Note interest) is returned to the Treasury at the end of the year. So after expenses, that means that 98% of the T-Note interest is returned. So it is to the government and tax payers benefit for the FRS to buy T-Notes.


Q. Is it correct and the debt can never be paid off under the current money system of country?

A. Technically, yes, but it's not a big deal. The law just says thet FRS currency needs to be collateralized and T-Notes are chosen because they are very liquid and help offset the cost of interest. A small amount of F-Notes are collateralized by assets other than T-Notes (gold, coinage, etc).

In the unlikely event that all $10T of our nations debt is paid off, the FRS would just have to buy other assets to pump money in the economy. Could be mortgages, CDs, or municipal bonds.

Answer 2

The intricasies of the operation of the Federal Reserve is neat and all that but the bottom line (and best kept secret) is The federal income tax does not go to the U.S. Treasury. The entire amount collected by the IRS goes directly to the Federal Reserve Banks (some foreign) to pay the interest on the national debt.
(look at the endorsement on your canceled check to the IRS).
Other than the borrowed funds (that will never get paid back) the federal government operates quite nicely on tariffs, import fees, excise taxes, and fines.

Answer 3

well the rest is true but the government could pay off the national debt if they stopped blowing it all on bombs in Iraq