Former Banker: The Fed Is NOT Run By Private Shareholders.
2018 aza. 26
Warren Mosler, former banker, discussing “ownership” of the Federal Reserve. Many people believe that the stock that banks own in the Fed proves that it’s a private organization, operating for profit of its shareholders. This is simply not true. The Fed was created by Congress, given its mandate by Congress, and all its profits above statutory outlays go to the US Treasury. The “shares” in the Fed do not convey ownership nor are they transferable. The dividend is a fixed interest rate, therefore even if stockholders could influence policy, they have no incentive for the Fed to make more profit (in fact they have incentive for it to make *less* profit because this generally means higher interest rates).
(i) Chairman Marriner Eccles
There are many quotes of Fed staffers saying this, some under oath. From Chairman Marriner Eccles: “One of your favorite complaints is that the Federal Reserve Banks are owned by private bankers and that the Board of Governors in Washington as well as the Federal Reserve Banks are operated in the interest of private bankers. These charges will not stand up under examination. The Board of Governors, the members of which are appointed by the President and confirmed by the Senate, is a public body. As to the Federal Reserve Banks, you rest your case upon the slender point that the stock of the Federal Reserve Banks is owned by the member banks. Congress specifically provided for this, as well as for the rate of dividend and Congress can change the nature of the stock and the rate of return at will. This so-called stock ownership, however, is more in the nature of an enforced subscription to the capital of the Federal Reserve Banks than an ownership in the usual sense. The stock cannot be sold, transferred or hypothecated, nor can it be voted in accordance with the par value of the shares held. Thus the smallest member bank has an equal vote with the largest. Member banks have no right to participate in earnings above the statutory dividend, and upon liquidation any funds remaining after retirement of the stock revert to the government. You greatly exaggerate the significance of this so-called stock ownership. At the current dividend rate of six per cent, it involves the payment annually of approximately $8,000,000 to more than 6,000 member banks, and could be done away with altogether without important effects except to put an end to an illusion created by you and others in the minds of some people.” (https://goo.gl/rgd7bv)
(ii) Bruce MacLaury, Former President of the Minneapolis Fed and Deputy Secretary of the Treasury
From Bruce MacLaury, Former President of the Minneapolis Fed and Deputy Secretary of the Treasury: “First, let’s be clear on what independence does not mean. It does not mean decisions and actions made without accountability. By law and by established procedures, the System is clearly accountable to congress—not only for its monetary policy actions, but also for its regulatory responsibilities and for services to banks and to the public… Nor does it mean that the Fed is independent of the government. Although closely interfaced with commercial banking, the Fed is clearly a public institution, functioning within a discipline of responsibility to the “public-interest.” It has a degree of independence within the government—which is quite different from being independent of government. Thus, the Federal Reserve System is more appropriately thought of as being “insulated” from, rather than independent of, political—government and banking—special interest pressures.” (https://goo.gl/l0Migk)
(iii) Chairman Bernanke
Here’s former Chairman Bernanke telling Congress under oath that the Fed will do whatever Congress tells them: https://youtu.be/pH2RLObp41o
(iv) W. Mosler
Add to that Mosler‘s account that his bank had “shares” in the Fed yet this gave him no policy influence. Plus due to the nature of Fed and Treasury operations, it’s necessary for them to be in near-constant communication.
(v) Randall Wray
More about this here: https://goo.gl/uPqIDf The Fed is a public/private hybrid, chartered to operate in the public interest. The Board of Governors, which oversees everything the Fed does, is clearly a public body (with their pay fixed at the level equal to that of a Cabinet Secretary). The remaining Fed employees, while technically considered “private,” are also chartered to operate in the public purpose (with their pay decided by the Board of Governors). That doesn’t mean the Fed does a good job or that it’s decisions aren’t heavily influenced by financial lobbies. They’ve enacted tons of bad policy and the bias towards banks is clear. But it’s not because they’re operating for shareholders, but rather through the same ways by which the rest of the government is bought by banksters: groupthink, tribalism, lobbying the President/Congress to appoint friendly Governors, and forming cozy relationships with regulators. This is typical “institutional decay” flavor of corruption, not “shadowy conspiracy” flavor. More discussion of this: https://goo.gl/5Kkz60 Watch the whole talk: https://www.youtube.com/watch?v=1RJP5…