Who owns the Federal Reserve?

May 13, 2009 9:49 AM

Who exactly owns the Federal Reserve?
posted by Dragonness to law & government (12 comments total)

That is like asking, who owns the white house or the national parks.

The Federal Reserve is part of the US Treasury, under the direction of the secretary of the treasury, and ultimately the President.

It is owned by the US gov't, controlled by the executive branch. In theory, the people own it.
posted by Flood at 9:52 AM on May 13

I ask because it seems at least in part privately owned.
posted by Dragonness at 9:55 AM on May 13

The Federal Government owns it. This is philosophically similar to "the people" owning it but not actually the case. For example, you can't just go wander onto any given piece of government property and use it how you like, because you don't own it. You don't have a 1/350M share of any given F-22, for example.
posted by Tomorrowful at 9:56 AM on May 13

I am, of course, not correct; it's an independent entity. It is not "owned" by anyone, but is controlled in the end by Congress - right now it's largely autonomous, but if Congress decreed a major change in its function or operation, it would have to comply, since it exists by act of Congress.
posted by Tomorrowful at 9:58 AM on May 13

The Federal Government does NOT actually "own" the federal reserve. It operates in a very gray area where it can act independently of the government, however is run by government appointees.

It's really its own entity with some government influence - but only because its governers are appointed, in a way like the supreme court.
posted by bitdamaged at 9:59 AM on May 13

^ technically I think that is incorrect.

The Fed is a quasi-public institution closely associated with the Treasury but not a part of it. If wikipedia is to be believed, it was set up to be somewhat decentralized (which was necessary for it to gain Congressional support 100-odd years ago), with each bank in the Federal Reserve system issuing its own preferred shares to private member regional banks -- these shares are non-tradable and pay 6% interest.

Excess profits above the preferred dividends and capital needs are credited to the Treasury, and its governance is appointed by the USG, which is more evidence of its quasi-public nature.

The Fed is certainly a creature of Congress but is set up to give it a degree of independence from the daily vicissitudes of party politics. Techinically it is owned by its member banks but this control is limited by the overall control of Congress.
posted by toroi at 10:06 AM on May 13 [1 favorite has favorites]

Who owns the Federal Reserve?

The Federal Reserve System is not "owned" by anyone and is not a private, profit-making institution. Instead, it is an independent entity within the government, having both public purposes and private aspects.

As the nation's central bank, the Federal Reserve derives its authority from the U.S. Congress. It is considered an independent central bank because its decisions do not have to be ratified by the President or anyone else in the executive or legislative branch of government, it does not receive funding appropriated by Congress, and the terms of the members of the Board of Governors span multiple presidential and congressional terms. However, the Federal Reserve is subject to oversight by Congress, which periodically reviews its activities and can alter its responsibilities by statute. Also, the Federal Reserve must work within the framework of the overall objectives of economic and financial policy established by the government. Therefore, the Federal Reserve can be more accurately described as "independent within the government."

The twelve regional Federal Reserve Banks, which were established by Congress as the operating arms of the nation's central banking system, are organized much like private corporations--possibly leading to some confusion about "ownership." For example, the Reserve Banks issue shares of stock to member banks. However, owning Reserve Bank stock is quite different from owning stock in a private company. The Reserve Banks are not operated for profit, and ownership of a certain amount of stock is, by law, a condition of membership in the System. The stock may not be sold, traded, or pledged as security for a loan; dividends are, by law, 6 percent per year.
posted by mattdidthat at 10:11 AM on May 13 [1 favorite has favorites]

The Fed is certainly a creature of Congress but is set up to give it a degree of independence from the daily vicissitudes of party politics. Techinically it is owned by its member banks but this control is limited by the overall control of Congress.

This, to my understanding, is incorrect The Fed has the ability to operate independently of congress and the president. It also is self funded and as such doesn't require Congressional budgeting which is a large measure of congressional control.

Its obviously a very unclear area and I could totally be wrong.
posted by bitdamaged at 10:12 AM on May 13

(note the fed was very much initially created by Congress...)
posted by bitdamaged at 10:14 AM on May 13

I worked in the Cleveland FRB for a bit. They repeatedly insisted that the Cleveland FRB chairmanwoman was my boss at the top of the heap, not Ben Bernanke. Bernanke's job is more staying in touch with the government than bossing the branches around.

Also consider the US Postal Service. The government still has control, even though it is more or less a private entity. Not the same thing, since it was privatised only recently.
posted by spamguy at 11:42 AM on May 13

mattdidthat obviously has the right answer.

But as an interesting side-note, I'll note that while the Fed is not a "profit-making" institution, it does actually earn a profit. It did pretty well last year, actually (well, ignoring the extra risk it brought on to its balance sheet). But it remits most of its profits to the Treasury.
posted by mullacc at 1:53 PM on May 13

I forgot where I heard this witty statement. The Federal Reserve is about as federal as Federal Express.

I suggest watching the video "The Capitalist Conspiracy" on google video. It is a bizarre filmstrip on this topic from the 60's.
posted by santogold at 10:50 PM on May 13