From the FRB:
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.
Oh...I don't know, even the FED itself admits that it is set up LIKE a private corporation...just it's a not-for-profit corporation. Well those are the best kind, aren't they? Many a TV preacher has made a fortune running not-for-profit corporations.
As the nation's central bank, the Federal Reserve derives its authority from the U.S. Congress.
Sounds good...like it's all under the thumb of our dear elected leaders. But the next sentence says:
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...
Oh...so it has complete control over our money supply and answers to no one.
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.
Oh well, I feel better now...I'm sure Congress keeps these people in line...wouldn't want the people who control ALL THE MONEY IN THE NATION to get out of line. I wonder if the bankers are ever able to gently "persuade" politicians to never affect in any real way how the Fed operates. If *I* controlled all the money in the nation...or even just 1/12th of it...I could probably purchase a little influence somewhere.
...it does not receive funding appropriated by Congress...
I should say not. If I understand correctly, the Fed generates (out of thin air) most of the money that Congress uses to run the nation...T-Bills, anyone? Just who did Congress borrow $6 Trillion from, anyways?
Sound a little fantastic?
Course...we needn't worry about it taking a long time to pay back these loans because the Fed is so sweet...after all is said-n-done:
After paying its expenses, the Federal Reserve turns the rest of its earnings over to the U.S. Treasury.
I know a lot of the banks I deal with try to give me back the interest I paid, too...Discover card pays me like .001% or something on all purchases.
But then there is the funny way that lending works...
The bank has you sign a note, right? Then they give you a check or increase your checking account, right? Sounds good, doesn't it?
But wait, you're looking at it backwards. To you a checking account is an asset. But to the bank it is a liability. To you the note is a note payable, but to the bank it is a note recieveable--an asset to the bank.
So let's go through it slowly again.
- The bank gives you nothing, until...
- ...you sign a note for $1000 and give it to the bank: the bank's assets just went up $1000.
- (Psst: They will debit "Notes Receivable.)
- Now the poor people gotta come up with a $1000 to give you...so they credit your checking account (whew...it's hard to make money these days).
- (Psst: They had to credit something...it might as well be your checking account).
A bank is required to have a certain small-n-fractional ratio of reserve notes per checking deposits, but basically they create "money" out of thin air (I mean, really, they just print the notes anyways), but you pay back actual money PLUS interest. You think they are only making the interest, but they are making the interest AND the principal.
I didn't believe it at first, either...but go through it real slow...you give them an ASSET (a "note recievable" to them). They credit your checking account or give you a check, but that costs them nothing--it's a bookkeeping entry that balances the books (an offsetting credit for the debit caused by getting the note from you). Then you PAY THEM BACK PLUS INTEREST.
(If I'm missing something in all that I would REALLY like to know what it is).
This message has been edited by TheLiteralist, 03-26-2005 03:13 PM
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