Why do we have to pay interest on the money the Federal Reserve Issues, I thought they worked for us ?

Question

No, not if it's American currency and I was the only one allowed to make American currency, yet charge interest to USA citizens, for no apparent reason other than I can.

Answer 1

It's simple, we don't. The U.S. Government pays interest on the U.S. Government securities, some of which are held by the Federal Reserve as collateral for Federal Reserve Notes. The Federal Reserve holds about $800 to $850 billion in U.S. Government securities. In 2006, the interest payment was $36.5 billion. After expenses were paid and the surplus fund was made equal to paid-in capital as required, the Federal Reserve returned to the U.S. Treasury $29.1 billion.

If the U.S. paid interest to the Federal Reserve strictly for the money that is issued, then Federal Reserve Notes would be ASSETS on the books of the Federal Reserve banks. However, they are not, they are LIABILITIES. That is because the Federal Reserve Notes constitute a DEBT OF the Federal Reserve NOT a debt TO the Federal Reserve.

BTW, the Federal Reserve is INDEPENDENT, it is not private. There is a difference. The Federal Reserve is setup in accordance to LAW. Title 12 U.S.C. Chapter 3 http://www.law.cornell.edu/uscode/html/uscode12/usc_sup_01_12_10_3.html

At the top of the Federal Reserve system is the Board of Governors. The seven members of the Board of Governors are all appointed by a President and confirmed by the Senate for 14 year staggered terms. Of those seven, two are chosen to be the Chairman and Vice Chairman of the Board of Governors. The Board of Governors provides general oversight of the system. They are required by law to report to Congress every year.

There are twelve district banks and 25 branches of the Federal Reserve system. They are setup SIMILAR to private corporations but they really are not. This is where most people get confused and the conspiracy theorists claim the banks are private. National banks, which are private corporations, are required to become members of the Federal Reserve system. To do this, they are required by law to SUBSCRIBE to the shares of one of the Federal Reserve district banks. The amount they must subscribe to is set by law to 3% of their capital. The member bank cannot own any more or any less than that amount. If the member bank increases its capital, it must subscribe to an additional amount of shares. If the member bank reduces its capital, it must surrender the shares that are over the 3%. These shares confer no rights of ownership beyond the par value of $100 per share and each share pays an annual 6% dividend.
The Federal Reserve shares cannot be traded, sold or even given away. Private ownership of Federal Reserve shares is not allowed by law.

There is a nine-member board of directors for each district bank. The Board of Governors selects three of those directors. The other six directors are selected by the member banks. Each bank gets ONE vote per director seat regardless of how many shares of the district bank they hold. The directors selected by the member banks are not allowed to be officers, directors, or employees of any bank and three of the selected directors are not allowed to own any shares in any bank.

Under the Federal Banking Agency Audit Act (Public Law 95–320), most Federal Reserve System operations are under the purview of the Government Accountability Office (GAO). In 2006, the GAO completed six reports on selected aspects of Federal Reserve operations. In addition, seven projects concerning the Federal Reserve were in various stages of completion at year-end. The Federal Reserve also provided information to the GAO during the year on numerous other GAO investigations. The reports are available directly
from the GAO.

Complete financial audits of the Federal Reserve are performed by independent auditors. These reports are part of the Federal Reserve annual reports to Congress. You can read the annual reports from the last few years at http://www.federalreserve.gov/boarddocs/rptcongress/
The audits of the system can be found at http://www.federalreserve.gov/boarddocs/rptcongress/annual06/pdf/audits.pdf

If the Federal Reserve were to be dissolved, once the member banks were paid back for the money they used to subscribe to the system and any unpaid dividends were paid, and money on deposit at the Federal Reserve was returned to the depositors, all assets and liabilities would become the responsibility of the U.S. Treasury.
12 U.S.C. Sec. 290 http://www.law.cornell.edu/uscode/html/uscode12/usc_sec_12_00000290----000-.html

BTW, income taxes do not go to the Federal Reserve. They go into the general fund to pay for various expenses of the government. In 2006, the IRS COLLECTED $1.04 TRILLION in individual income taxes alone. The interest payment on the debt was $405 billion. The Federal Reserve only holds about $800 billion of the debt and collected $36.5 billion in interest. Of that amount $29.1 billion was returned to the U.S. Treasury. Net result of that is the Federal Reserve ended up keeping only $7.4 billion. This can clearly be seen on the INDEPENDENTLY AUDITED financial statements of the Federal Reserve.
http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=203
http://www.treasurydirect.gov/govt/reports/ir/ir_expense.htm
http://www.federalreserve.gov/boarddocs/rptcongress/annual06/pdf/audits.pdf

Answer 2

Wrong The Federal Reserve is "PRIVATE" a corrupt business. That should NOT exist, part of the NEW World order that started in 1913 and the average citizen left clueless. You should NOT have to pay interest! Infact the Legal citizen majority of USA is who should really reign with rule & control over money with equal access. http://www.grinningplanet.com/2004/11-11/direct-democracy-plutocracy-article.htm NGC620 has the text book version down, but leaves out some other important facts like The Federal Reserve has no constitutional justification! Plus several Government entities report on the same statistics as the GAO of which none come out with the same figures! Also no average person gets to sit on the board they are all wealthy well connected people! This is just some proof of rule & control by the fascist in USA!

Answer 3

I have researched this topic for five years now. All the money Citizens pays in income taxes goes to the Federal Reserve. The IRS are a collection agency for the FR. The money Government spends is borrowed for the FR and they never have to pay it back because all the FR wants back are the tax dollars Citizens voluntary pays in. The only people that are required by law to pay federal income taxes are people you work for federal, state and local government employers. So here is the answer to you question. The federal reserve survives from taxes and interest.

Answer 4

Blame that on the stupid neocons. This country is in so much debt that our tax money can pay off the interest rate the government owed for the the next 50 years.

Answer 5

the annual surplus of the Federal Reserve is given to the US treasury where it reduces the US debt.

out of one pocket and into another.

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besides, why would you want to change a system that seems to be working well?

Answer 6

Nope! Not the Federal Reserve.
Nothing to do with the Government.
A separate entity.

Answer 7

the federal reserve is a privately held company.

it is one of many monopolies in this land where monopolies are supposedly illegal...

Answer 8

So if someone worked for you and they loaned you money, you would expect to not pay them interest on the loan?