How does the Federal Reserve work?

Question

What does it do, who owns it, is it like a bank--with interest, etc....

It's an honest question. Doesn't anyone know?

Answer 1

See if you can get ahold of a book called "The Creature of Jekyl Island". It will tell you all about the "Federal Reserve".

Answer 2

The Federal Reserve System (also the Federal Reserve; informally The Fed) is the central banking system of the United States.

The Federal Reserve System is a quasi-governmental/quasi-private banking system composed of (1) the presidentially-appointed Board of Governors of the Federal Reserve System in Washington, D.C.; (2) the Federal Open Market Committee; (3) 12 regional Federal Reserve Banks located in major cities throughout the nation acting as fiscal agents for the U.S. Treasury, each with their own nine-member board of directors; (4) numerous private U.S. member banks, which subscribe to required amounts of non-transferable stock in their regional Federal Reserve Bank; and (5) various advisory councils.

Answer 3

Wow. That's quite a lot to your question.

Let's start with the Federal Reserve Mission statement:

"The Federal Reserve System is the central bank of the United States. It was founded by Congress in 1913 to provide the nation with a safer, more flexible, and more stable monetary and financial system. Over the years, its role in banking and the economy has expanded.

Today, the Federal Reserve’s duties fall into four general areas:

- conducting the nation’s monetary policy by influencing the monetary and credit conditions in the economy in pursuit of maximum employment, stable prices, and moderate long-term interest rates

- supervising and regulating banking institutions to ensure the safety and soundness of the nation’s banking and financial system and to protect the credit rights of consumers

- maintaining the stability of the financial system and containing systemic risk that may arise in financial markets

- providing financial services to depository institutions, the U.S. government, and foreign official institutions, including playing a major role in operating the nation’s payments system "

(Ref: http://www.federalreserve.gov/generalinfo/mission/default.htm)

The Federal Reserve System is organized with a government agency at the top (the Board of Governors), and branches beneath them that resemble private corporations. (http://www.federalreserveeducation.org/fed101/structure/ )

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.

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. These 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. Are the Fed branches privately owned? The Fed says 'No' (ref http://www.federalreserve.gov/generalinfo/faq/faqfrbanks.htm#6 ). Courts have ruled that the branch banks can be treated as a private corporations for purposes of tort law.