Politics and Money

[fuagf]

Myth #4: The Federal Reserve is a privately owned bank out to make a profit at the taxpayers' expense.

This myth claims that the 12 Federal Reserve banks are privately owned and therefore want to earn a profit just like any other company. Of course, the Fed holds the reigns of monetary policy, so naturally they will use it for the benefit of their owners and not the economy at large. And finally, since the Fed owns lots of government bonds, much of the Fed's profits come at the taxpayers' expense through the interest paid to the Fed on those bonds. Like many of the other Federal Reserve myths, this one has a small degree of truth to it, but also has a fair amount of misinterpretation and it leaves out a number of crucial details.

[...]

Conclusion

The regional Federal Reserve Banks are private owned, but they are controlled by the Board of Governors -- a federal agency whose members are appointed by the President and confirmed by the Senate. The Board sets monetary policy and the Federal Reserve Banks execute it. In addition, the Fed does not use any taxpayer money to fund its operations. While the Fed does collect interest on government bonds, the Treasury would have had to make such payment even if they Fed did not hold any bonds. Moreover, the Fed rebates a significant share of its net income to the Treasury each year, revenues the government would not have at all if the Fed owned no government bonds.

.. the stuffing is here .. http://www.publiceye.org/conspire/flaherty/flaherty4.html

====== .. ok, how about the influence of the BIS? .. bits ..

The Bank for International Settlements (BIS) is an international organization of central banks which "fosters international monetary and financial cooperation and serves as a bank for central banks". As an international institution, it is not accountable to any single national government.

The BIS carries out its work through subcommittees, the secretariats it hosts and through an annual general meeting of all member banks. It also provides banking services, but only to central banks and other international organizations. It is based in Basel, Switzerland, with representative offices in Hong Kong and Mexico City.

[...]

Two aspects of monetary policy have proven to be particularly sensitive, and the BIS therefore
has two specific goals: to regulate capital adequacy and make reserve requirements transparent.

Seems kinda clear from the number of financial dodgy dealings along with the continuing financial problems that
the BIS have not been totally successful in achieving their two specific goals .. oh, another bit on the goals ..

The BIS's main role is in setting capital adequacy requirements. From an international point of view, ensuring capital adequacy is the most important problem between central banks, as speculative lending based on inadequate underlying capital and widely varying liability rules causes economic crises as "bad money drives out good" (Gresham's Law).

ummm .. more here ..

Goal: a financial safety net

The relatively narrow role the BIS plays today does not reflect its ambitions or historical role.

A "well-designed financial safety net, supported by strong prudential regulation and supervision, effective laws that are enforced, and sound accounting and disclosure regimes", are among the Bank's goals. In fact they have been in its mandate since its founding in 1930 as a means to enforce the Treaty of Versailles.

The BIS has historically had less power to enforce this "safety net" than it deems necessary. Recent head Andrew Crockett has bemoaned its inability to "hardwire the credit culture", despite many specific attempts to address specific concerns such as the growth of offshore financial centres (OFCs), highly leveraged institutions (HLIs), large and complex financial institutions (LCFIs), deposit insurance, and especially the spread of money laundering and accounting scandals. .. more .. http://en.wikipedia.org/wiki/Bank_for_International_Settlements#Role_in_banking_supervision

The BIS does not set monetary policy, and obviously does not have the power to set regulatory
standards, so it's kind of difficult to see them actually running the show for their own interests.

====== .. OOPS! .. the one at the top of this post is here with others from publiceye.org ..

By: Edward Flaherty, Ph.D. Department of Economics College of Charleston, S.C.

Facts: Yes, the Federal Reserve banks are privately owned, but they are controlled by the publically-appointed Board of Governors. The Federal Reserve banks merely execute the monetary policy choices made by the Board. In addition, nearly all the interest the Federal Reserve collects on government bonds is rebated to the Treasury each year, so the government does not pay any net interest to the Fed.

Facts: No foreigners own any part of the Fed. Each Federal Reserve bank is owned exclusively by the participating commercial banks and S&Ls operating within the Federal Reserve bank's district. Individuals and non-bank firms, be they foreign or domestic, are not permitted by law to own any shares of a Federal Reserve bank. Moreover, monetary policy is controlled by the publically-appointed Board of Governors, not by the Federal Reserve banks.

Fact: Independent accounting firms conduct full financial audits of the Federal Reserve banks and the Board of Governors every year. The Fed is also subject to certain types of audits from the Government Accounting Office.

Facts: The Federal Reserve rebates its net earnings to the Treasury every year. Consequently, the interest the Treasury pays to the Fed is returned, so the money borrowed from the Fed has no net interest obligation for the Treasury. The government could print its own currency independent of the Fed, but there would be no effective safeguards against abuse of this power for political gain.

Facts: The Federal Reserve banks have only a small share of the total national debt (about 7%). Therefore, only a small share of the interest on the debt goes to the Fed. Regardless, the Fed rebates that interest to the Treasury every year, so the debt held by the Fed carries no net interest obligation for the government. In addition, it is Congress, not the Federal Reserve, who is responsible for the federal budget and the national debt.

Facts: Kennedy wrote E.O. 11,110 to phase out silver certificate currency, not to issue more of it. Records show Kennedy and the Federal Reserve were almost always in agreement on policy matters. He even signed legislation to give the Fed more authority to issue currency.

Facts: McFadden was incorrect regarding the Fed costing the government money. However, later economic analysis agrees with him that Federal Reserve policy blunders had a substantial role in causing the Depression. However, his implication that this was done deliberately has no basis in fact. Moreover, for a dozen years prior to his rant, McFadden had been the chairman of the House subcommittee that oversaw the Federal Reserve. Why didn't he do anything to reform or abolish the Fed while he had the chance?

Facts: The banking system is indeed able to create money with a mere computer keystroke. However, a bank's ability to create money is tied directly to the amount of reserves customers have deposited there. A bank must pay a competitive interest rate on those deposits to keep them from leaving to other banks. This interest expense alone is a substantial portion of a bank's operating costs and is de facto proof a bank cannot costlessly create money.

Fact: The term 'lawful money' does not refer to gold or silver coin, but to types of money which the government would permit banks to use when tabulating their reserves. These types of money included, but were not limited to, gold and silver coin.

BY: Edward Flaherty, Ph.D. Department of Economics College of Charleston, S.C.

* Myth #1: The Federal Reserve Act of 1913 was crafted by Wall Street bankers and a few senators in a secret meeting.
* Myth #2: The Federal Reserve Act never actually passed Congress. The Senate voted on the bill without a quorum, so the Act is null and void.
* Myth# 3: The Federal Reserve Act and paper money are unconstitutional.
* Myth# 4: The Federal Reserve is a privately owned bank.
* Myth #5: The Federal Reserve is owned and controlled by foreigners.
* Myth #6: The Federal Reserve has never been audited.
* Myth #7: The Federal Reserve charges interest on the currency we use.
* Myth #8: If it were not for the Federal Reserve charging the government interest, the budget would be balanced and we would have no national debt.
* Myth #9: President Kennedy was assassinated because he tried to usurp the Federal Reserve's power. Executive Order 11,110 proves it.
* Myth #10. The Legendary Tirade of Louis T. McFadden

[ links for each dot point inside ]

http://www.publiceye.org/conspire/flaherty/Federal_Reserve.html