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i understand that the 12 member banks sell something similar to "shares" to private banks.

does this still make the fed a government institution then?

does the fed make money to loan out and profit just like any private bank?

2007-02-20 15:14:24 · 6 answers · asked by Anonymous in Social Science Economics

OKAY, FOR MR. EXPERT DOWN THERE VOXYGEN (WHATEVER) YOUR ARGUMENT IS BYPASSING THE EVIDENCE HERE.
THE PRIVATE BANKS BENEFIT. WHO OWN "SHARES" (I KNOW THEY MAY NOT BENEFIT OFF OF PROFITS, BUT THEY DO BENEFIT OFF OF MANAGING THIS MONEY MAKING MACHINE).

2007-02-20 15:58:07 · update #1

FOR THE NEXT EXPERT KEVIN STUD, YOU ARE SAYING THAT THEY ARE "REQUIRED TO BUY SHARES IN THE FED"?

WELL , SOUNDS LIKE MAYBE THEY HAD A HAND IN MAKING THAT LAW, DOESNT IT?

2007-02-20 16:00:19 · update #2

AND FOR KEVIN STUD, YES THEY LOBBIED CONGRESS TO APPROVE THEM JUST LIKE THEY DO THINGS LIKE PROTECTION FOR ISRAEL AND THE IRAQ WAR.

2007-02-20 16:01:33 · update #3

6 answers

i would think so

2007-02-20 15:34:49 · answer #1 · answered by Anonymous · 0 0

The Federal Reserve System describes itself as a not for profit organization that is within the U.S. government but independent of the government (at least unless and until its enabling legislation gets amended).

Although described as a "not for profit", the Federal Reserve System does make a profit and it doesn't require funding from Congress. The Federal Reserve Banks also make a profit, of which, about 92% goes to the U.S. Treasury.

Does the Fed "make money"? Yes that's literally what it does!

Just like any private bank? No. The Fed is not like any private bank.

Edit: response to asker's comments.

You've asked a question and I've answered it. What private banks make from their ownership of Fed shares is fixed by statute through the Federal Reserve Act of 1913, as amended.

Let's hope that when the government wants to create a system of regulation that it takes the time to understand what it is regulating. In this particular case, following the Panic of 1907 there was a consensus in the country that there should be, yet again, a central bank in the U.S. Per the Vreeland-Aldrich Act a National Monetary Commission was authorized to devise a plan (aka the Aldrich Plan). This plan proposed an entirely private Fed. The Plan wasn't acceptable to Democrats and therefore it was modified to make the Fed a part of the government per the Act of 1913. Since then, it's been amended and there are additional Acts (Monetary Control Act, Humphrey Hawkins, etc.,etc., etc.) that come and go and modify the original plan. Not least, the money within the 1913 Fed was on a gold standard. By fits and starts, it's a fiat currency now.

And yes, a bank with a national charter does not have a choice as to whether or not it will be a member bank of at least one of the regional Fed banks. They have to do so by law.

2007-02-20 15:25:57 · answer #2 · answered by Voxygen8 4 · 2 0

There is a lot of misinformation being given out here.

Let me try to give you some good answers -- as a former Fed economist.

1. The Federal Reserve System is composed of the Board of Governors and 12 Federal Reserve Banks.

2. The Board of Governors is a quasi-government agency, just like FDIC or SEC. It has a very specific function, and it is accountable to Congress. The members of the Board are appointed by the President of the U.S. and they must be confirmed by Congress.

3. The 12 Federal Reserve Banks are private banks representing the banks in their district. These banks manage the check clearing facilties for the region, and they also regulate certain banks in their district.

4. Federal Reserve Banks are funded by the banks in their region. Each private bank has to keep a certain amount of funds on reserve at the Bank in cases of emergency. There are NO dividends paid on these reserves. If you saw It's A Wonderful Life, you know why this is a good idea. In those days the Federal Reserve System did not exist, or the bank could have borrowed money for their emergency, rather than going to Mr. Potter.

5. Reserves are invested in U.S. Treasury Securities, and the interest is usally turned back to the Treasury at the end of each year, after paying for staff salaries, rent, etc.

2007-02-21 09:15:55 · answer #3 · answered by Allan 6 · 1 0

Private banks in the US are required to buy those shares in the Federal Reserve in order to be part of the federal reserve system. They receive dividends on these shares, but other than that the shares do not represent real ownership.

The Fed is definitely part of the government, it was created by Congress, it can be eliminated tomorrow by another act of Congress, and it is answerable to Congress. But its status is a bit weird and it's often called quasi-governmental -- it was set up that way in order to be a kind of liaison between the government and the private banking system, and to control the money supply.

2007-02-20 15:55:36 · answer #4 · answered by KevinStud99 6 · 1 1

Yep, and a state of conflict now exists between the Constitutional government of those us of a and the fascist, synarchist, neo-feudalist elite which controls the Fed and different important banks.

2016-12-17 15:06:45 · answer #5 · answered by ? 4 · 0 0

Federal reserve is a private organization.

2007-02-20 15:19:56 · answer #6 · answered by soccergarysw 3 · 0 1

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