economy

The Federal Reserve *System* is a government-owned and run, though the branch banks are more similar to private corporations.

To review:

The Federal Reserve System is a congressionally-chartered agency like the USPS and NASA. It is organized with a 100% government agency at the top (the Board of Governors), and branches beneath them that resemble 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; it is a government agency. Board members are forbidden by law to have any economic interest in a private bank. (Ref: Title 12 chapter 3 of the U.S. Legal Code). The Board determines monetary policy and provides high level oversight of the branches.

The 12 branches, however, are organized to involve member banks in the day-to-day operation. Member banks are required to buy shares in their branch. Each bank has one vote. The shares get a standard 6% dividend. They can vote for 6 of their 9 board members. All ‘profit’ from the Federal Reserve branches are turned over to the Treasury at the end of the year.

Clearly the Board of Governors and the system itself is not private. But are the Fed branches ‘private’? The unique duality of control allows for reasonable peple to argue either side. Certainly it is not privately ‘owned’ in the classic sense as shares never change in value, have no relationship to the worth of the bank, and cannot be sold to the open market. However, clearly the ability to vote for most of their directors (of which are usually almost approved by the Board of Governors) gives the member banks considerable control of the day-to-day operations. Another telling sign is the Board of Governors are paid as Federal employees while the branches use their own payroll system. In the court ruling "Lewis vs US", it was determined that the branches can be considered ‘private’ for the purposes of tort law (i.e. they can be sued) relative to the day to day operations, but probably not where they are performing official government functions. To put it into terms people can relate to, I would equate this branch control as outsourcing of a government controlled function; similar to how congress might hire an employee-owned printing firm to run a print shop in the capital building.

=== Re: taxes we pay out of our income, pay for the interest the Federal Reserve charges our government.

Nonsense. The math just doesn’t add up. This is just conspiracy theory drivle easily disproved with the most rudimentary of Google searching.

Research for yourself:

A) Look up how much revenue comes from income tax.

For 2006, it was $1.047T

(Ref: http://www.publicagenda.org/issues/factfiles_detail.cfm?issue_type=federal_budget&list=7 )

B) Look up how much interest is generated annually on the national debt.

For 2006, it was $226B.

(Ref: http://www.publicagenda.org/issues/factfiles_detail.cfm?issue_type=federal_budget&list=8)

C) So does about 22% of income tax goes to the national debt interest? Not really.

All income tax goes to the general revenue fund from which all expenses are paid. It is not specifically directed to any program (like Social Security and Medicare taxes are).

As a proportional percentage, about 8.5% of income tax goes to national debt interest.

(ref: http://www.publicagenda.org/issues/factfiles_detail.cfm?issue_type=federal_budget&list=8)

D) So much much does the Federal Reserve get of the income tax?

There are two valid answers:

1) $0. No dollars are budgeted to the Federal Reserve. It receives all its income from user fees and interest on T-Bills it owns.

2) about $3B which is the budget for the Federal Reserve. (Ref: http://www.federalreserve.gov/generalinfo/foia/frbbankbudgets/2007ReserveBankBudgets.pdf )

By all, the Fed has to turn over it’s profits (income after expenses) to the Treasury at the end of the year. All that interest the Fed gets on T-Bills it owns? 90%+ is returned to the Treasury.