Topic: The Federal Reserve
The Money Matrix - Who Owns the FED (PART 7/15)
...and why it both does and does not matter.
by Jake Towne, the Champion of the Constitution
(libertarian)
Wednesday, February 11, 2009
CARTEL - n. a combination of independent commercial or industrial enterprises designed to limit competition or fix prices (per Merriam-Webster's Dictionary) (emblem)
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adult: "Our government borrows money every year."
child: "Where does the money come from? How can we always be in debt and not have to pay it off?"
adult: "We are in debt to ourselves."
child: "That doesn't make any sense!"
adult: "It is based on fractional reserve banking. Banks do not have to have all the money that they lend."
child: "That sounds silly! And why is the government bailing out the banks? Don't the banks already have all the money?"
adult: "The banks lent all their money to us, so they need more money from the government so they can continue lending to us."
child: "I still don't understand."
adult: "You'll understand it when you get older."
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NOTE: Please note I've updated this article in June 2009 here " The Money Matrix - Who Owns the FED (UPDATED PART 7/15)"
As we continue, I hope many of the "adult's" fallacies in the above dialogue are becoming clearer, especially after "The Money Matrix - How the FED Works (PART 6/15)." As always, please feel free to leave any feedback or questions below.
So, who owns the Federal Reserve? Well, it certainly is not the US government, as many would suppose. In fact, I have found that quite a few - including myself last year - who are roughly aware of how the FED works but believe that the owners of the FED is a secret. Well, it is not. The FED's Purposes and Functions (page 21/146) reads:
"As of March 2004, of the nation's approximately 7,700 commercial banks approximately 2,900 were members of the Federal Reserve Systema - approximately 2,000 national banks and 900 state banks. Member banks must subscribe to stock in their regional Federal Reserve Bank in an amount equal to 6 percent of their capital and surplus, half of which must be paid in while the other half is subject to call by the Board of Governors. The holding of this stock, however, does not carry with it the control and financial interest conveyed to holders of common stock in for-profit organizations. It is merely a legal obligation of Federal Reserve membership, and the stock may not be sold or pledged as collateral for loans. Member banks receive a 6 percent dividend annually on their stock, as specified by law, and vote for the Class A and Class B directors of the Reserve Bank. Stock in Federal Reserve Banks is not available for purchase by individuals or entities other than member banks."
So, the owners of the FED are simply other national and state banks. What is rather interesting is that this is no normal company stock! First, they are paid a perpetual annual dividend of 6% per the Federal Reserve Act of 1913 which is not a "law" in the technical sense that the FED implies. Second, apparently this "stock" is part of each member bank's balance sheet as only have is "paid in" to the FED and the "other half is subject to call" by the FED. While many become quite alarmed by the mandated 6% dividend paid, please understand that this is just a small babbling brook when compared to the powerful monetary torrents of fractional reserve banking and FED Open Market Operation's money creation/destruction as explained in Part 6.
[Side note The FED also has a similar FAQ blurb online here. I have several emails pending at various Reserve branches inquiring as to whether the actual lists of the member banks can be shared with me. If I have any luck, I will update this article and then proceed to ask the FED to share the size and number of shares for each member bank, which I imagine will not be shared with me, but you never know! A partial list of the New York district member banks was acquired here in 2004 by Ed Steer.]
Why do the owners of the FED not matter?
Well, as stated, the member banks have no ownership or decision-making rights as the shareholders of a corporation would. Their sole privilege is to influence the selection of several of the Reserve Bank division's directors who in turn may have a chance to influence a rotating chair on the FOMC (Federal Open Market Committee) or appoint the Federal Advisory Council. As seen in the below diagram, this is not much power at all.
So, why does who owns the FED matter?
Well, no American citizen, nor the American government, nor any other non-bank entity or corporation for that matter, can purchase stock. The FED is truly a "bank of banks" ruled by a small oligarchy of prominent central bankers. Ben Bernanke is just the current ringleader paraded out to the public. Given the vast power of the FED as explained in the last article, this piece, and in the next upcoming article, I can claim with confidence that the Federal Reserve is a banking cartel. It has a monopoly over the money supply and credit of the United States. It is at best an unconstitutional quasi-governmental entity setup by the Federal Reserve Act of 1913. Note the lack of limits the government has on auditing or overruling the FED.
- "Monetary policy is exempt from audit by the Government Accountability Office." - (page 15/146)
- "The Federal Reserve is an independent agency, and that means, basically, that there is no other agency of government which can overrule actions that we take." - Alan Greenspan when asked by Jim Lehrer about the FED's relationship with the President.
There are those who would argue that my claim that the FED is too powerful - let's not forget Congress and the Treasury! - must be false since the banks are presently adamantly refusing to extend credit after being given taxpayer money and the FED's newly created money. My reply is a far better question is why hasn't this "bank of banks" forced its member banks to lend in this current downturn?
MARCH UPDATE: As per the above, I concluded some correspondence with the FED and as a result I wrote this article "The Federal Reserve Replies on its Stock Ownership and Treasury Purchases" where I explained how I came to my conclusion using the information provided by the FED to estimate the ownership of the FED's member stock. This article has been vetted by several former bankers and financial experts so I feel comfortable listing it below. However, please feel free to disagree and reply with any criticism. The below should, of course, only be taken as an estimation.
So, from the above, note that the top 4 banks Bank of America, JP Morgan Chase, Citigroup, and Wachovia, would control roughly 50% of the stock of the Federal Reserve Bank, and the top 10 banks, including Wells Fargo, HSBC, and the Bank of New York, would control over 68% of the stock which is shown by the graph I put together below.
Of course, as I explained above, stock ownership in the FED does not confer control over the FED, but it is just more information pointing at the entire immoral cartel. For the list of primary dealers that assist the FED with their money supply/Open Market Operations also includes Bank of America, JP Morgan Chase, Citigroup, and HSBC.
For the Republic,
Jake, the Champion of the Constitution
[Reach the Author Here!] www.CampaignForLiberty.com www.EndTheFED.us (Banner courtesy Mike Burke)
END THE FED! Flyer for The International - The Movie"You can see the bigger picture! Find out what it's all about! You're open to the skyline! You won't want to go back home!"
- Morcheeba, "Enjoy the Ride" In many ways, the world in which we now live is a product of the "ride" our money masters have chosen to give us by their actions. What happens if enough of us want to get off?
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We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.
As always, unlike the NFL, the author grants full permission to allow any accounts of, rebroadcasts, retransmissions, repostings in part or full of this article to your blog or anywhere else in order to promote the Restoration of our Republic.
Veritas numquam perit. Veritas odit moras. Veritas vincit. Truth never perishes. Truth hates delay. Truth conquers.
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Nolan Chart Facebook Group Page Created
Summary of Articles and Bibliography for Jake, the Champion of the Constitution (1/1/2009)
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The Money Matrix Series
- America, Were Michael Phelps' Eight Olympic Gold Medals Worth Winning?
- The Money Matrix - Prelude (PART 1/15)
- The Money Matrix - What is a Dollar Bill Worth? (PART 2/15)
- The Money Matrix - What Makes Money Money? (PART 3/15)
- The Money Matrix - What is Honest Money? (PART 4/15)
- The Money Matrix on the Grand Deception of Seigniorage (PART 5/15)
- The Money Matrix - How the FED Works (PART 6/15) (A must-read, this article's content is important as I haven't seen its information compactly put together in one place)
- The Money Matrix - What the Heck Are Derivatives? (PART 10/15)
- Save Ron Paul's Voice - A Money Matrix Addendum
- A Money Matrix Addendum: Citigroup and GATA Call for an End to the Suppression of the Gold Market
- MY PROPHECY - The Federal Reserve Will End! A Money Matrix Addendum
Part I: "The End for the Dollar and all Fiat Currencies (1/5)"Part II: "The Next Bubble to Pop! (2/4)"Part III: "On Gold and Market Manipulation (3/5)"Part IV: "The Significance of Gold Backwardation Explained (4/5)"Part V: "More on Gold and Silver Backwardation and Manipulation (5/5)"and also from January 2009, Silver in Backwardation! Has the Last Contango Been Danced in Washington? The "We Didn't Learn Much from the Great Depression" Miniseries
The "Great Slump" of 2008 (PART 1/2)
Bernanke's Great Lie - The "Gold Standard" and the Great Depression (PART 2/2)
If you liked this article, you might also like:
The Money Matrix - How the FED Works (PART 6/15)
The Money Matrix - What the Heck Are Derivatives? (PART 10/15)
The Federal Reserve - A Good Company to Work For?
The Federal Reserve Replies on its Stock Ownership and Treasury Purchases
Ron Paul's Federal Reserve Transparency Act of 2009
The End for the Dollar and all Fiat Currencies (1/5)
MY PROPHECY - The Federal Reserve Will End! A Money Matrix Addendum
Bernanke's Great Lie - The "Gold Standard" and the Great Depression (PART 2/2)
Rioting at the Gates of Thermopylae: The Ramparts of the FED & Central Banks Shudder
©2009 Jake Towne, the Champion of the Constitution, all rights reserved. You must have written permission from the author in order to republish this work.
Published: Wednesday, February 11, 2009
Last modified: Sunday, June 21, 2009
The views expressed in this article are those of Jake Towne, the Champion of the Constitution only and do not represent the views of Nolan Chart, LLC or its affiliates. Jake Towne, the Champion of the Constitution is solely responsible for the contents of this article and is not an employee or otherwise affiliated with Nolan Chart, LLC in his/her role as a columnist.
| More Articles By Jake Towne, the Champion of the Constitution |
Reader Comments:
Posted By: gene
Date: 2009-02-11 17:56:11
Hi Jake, another great informative article! did you read, "federal reserve as a cartelization device" by Rothbard? traces the history. i wrote an article on the Fakete interview you copied for me. it isn't too far down the list if you want to see it.
Posted By: Master C
Date: 2009-02-11 20:24:15
Jake,
You seem to be so disappointed by your discovery that the Fed is owned by its member banks. What's so unusual about that? What's unusual is your thinking that private corporation stock holders have MORE power than they do.
You mention that "the member banks have no ownership or decision-making rights as the shareholders of a corporation would.” What rights do you think private stockholders have in the corporate world? All they can do is vote on previously-nominated members of the Board of Directors, or approve/disapprove of certain corporate policies. If you think they have the right to any input in the management or decisions of the corporation, try putting in YOUR two cents worth the next time you feel motivated. They'll put your suggestion in the disposable OUT BASKET faster than you can send it in!
I think you're also a little confused about this issue of banks not having the money on hand that's deposited in them. THAT'S HOW THEY MAKE MONEY; they lend it out, collect fees and interest on it, and earn dividends for their stockholders.
This is only a symantical distinction. In fact, that's what ACCOUNTING is all about; keeping track of who owes what to whom. Just the fact that the banks don't have all the money, or the stores don't really own the inventory they have, or that the grocery stores won't pay their suppliers until they sell their goods doesn't make the system any less "real", it merely makes it intricate.
You know, when you tell your child or your friends that you OWN your car or you OWN your home, you aren't really being honest with them. You don't own them until you pay them off. Yet, when you drive around in your car, or invite your friends over for a barbeque or a swim in the pool (that you probably don't own yet, either) you still act as if you own it, and you enjoy them. You even talk about SELLING them, even though you have to pay them off first before you can do that.
This whole FEDERAL RESERVE system seems to really throw some of the people on this website for a loop. You think that they are pulling a slight of hand operation, or deflating your money, or fraudulently taking it from you, or all sorts of distorted impressions. Yet, you don't seem to recognize the GROWTH, FLEXIBILITY, INVESTMENT, and DEBT DIMINISHMENT that takes place as a result of it.
When I bought my first home, I had to sign a mortgage for $38,000 and had to put 20% down on it. Wow, was that a stretch ~ AT THE TIME. In five years, I was making so much more money that my house payment was a breeze, and the value of my home was worth more, the equity I had in it was more substantial, and buying my NEXT home was MUCH EASIER.
THAT'S WHAT FIAT CURRENCY CAN DO FOR YOU ~ if you work in the system. If you insist on FIGHTING it, or don't know how to INVEST in it, you're going to fall behind and you're going to HATE IT.
A FIAT MONEY system promotes growth, encourages INVESTMENT, and stimulates INTERNATIONAL TRADE. That's why ALL COUNTRIES use it. No one is back on that tired, antiquated, poverty-imposing HARD CURRENCY system because it strangles growth and investment. It's like the difference between having an economy run with CREDIT CARDS or one run with CASH. They both work, but the CREDIT CARD system is much faster, much more convenient, and it easily grows.
If you have to wait to save up your CASH to buy a car or a house, you're probably NEVER going to be able to do it. With a credit card, or a FIAT system ~ it's easy.
Now, will there be defaults? Sure. Will some people fall behind, or get into debt trouble? Sure. But so will some people who OWN GUNS. You give them a GUN and they're going to MISUSE IT. Same with credit.
In reading through your FEDERAL RESERVE articles, I haven't seen any reasons for you to insist that the system is going to fail. It may have some PROBLEMS, it may even STRUGGLE from time to time, but that's a looooong way from FAILING. There are lots of COUNTRIES, lots of PEOPLE, and lots of REASONS to keep the system plugging along. In fact, it looks to me like the US is doing better than a lot of OTHER COUNTRIES at the moment. We may survive DOOM just by default!
There are probably 6 or 8, or maybe 10 people on this website who are CONVINCED that the system is coming down. But, they're the same ones who think that a LIBERTARIAN viewpoint is going to someday prevail, too. Wrong on both counts, I'm afraid.
They've been screaming "the sky is falling" for centuries. So far, we've still got that big, beautiful blue sky overhead, and lots of fresh rainwater washing down on us. You can keep hoping, and keep screaming that DOOM is just around the corner, but you might want to try a new RAIN DANCE. Because this one isn't working.
Master C
Posted By: Jake, the champion of the constitution
Date: 2009-02-12 02:13:16
Dear Gene -
Thanks for the read!! I already read your Fekete article, gave it a thumbs up!
Dear MC -
Thanks for writing back! From your reply:
"I think you're also a little confused about this issue of banks not having the money on hand that's deposited in them. THAT'S HOW THEY MAKE MONEY; they lend it out, collect fees and interest on it, and earn dividends for their stockholders."
Yeah, have you taken a look at Citibank's balance sheet lately? SIV, CDO, OTC derivatives mean anything to you? The banks have lent out the money at very high risk - though "theoretically" riskless return.
"A FIAT MONEY system promotes growth, encourages INVESTMENT, and stimulates INTERNATIONAL TRADE."
Yep, US GDP is doing great right now due to fiat money. So is the Baltic Dry Index - down about 95% - that's a great indicator for international trade. How about you ask the typical American for their "growth" on their "investments"?
It's also funny to hear you talk about money - what's your view on "mark-to-market" and why are the banks so fearful of it?
As far as hard money as an investment goes, try reading this http://www.nolanchart.com/article5747.html
How's that house doing, and your paper investments - and those paper fiat notes you seem to like so much? I hope you personally are doing fine, but many other Americans - especially those recently made unemployed by the "benefits" of debased fiat money - would beg to disagree.
Posted By: Master C
Date: 2009-02-12 08:49:59
Jake,
We've seen these cycles over and over again. It's just like a tornado ~ if it hits YOUR home it's a disaster, but they hit other people ALL THE TIME and we don't worry about it.
There will certainly be banks that fail, and business layoffs. So what's new? This is the market correcting itself. There will be MERGERS, and there will be stronger institutions buying up the failed ones. For all those naysayers that you listen to, it's just HYSTERIA. Those of us who aren't afraid of some rough water are still going to go sailing.
But this calamity over the end of the world, and the economic meltdown of all time is as overblown as an asteroid hitting Earth.
By the way, if you live in as beautiful a home as I have and don't plan to sell or move for a while (in my case, probably NEVER) the market has no rough currents for me at all. It's only the people and banks who OVER extended who are in trouble. If you stay within your reach, things will ALWAYS be tolerable and safe.
As I said, if you MISuse the GUN, you can cause calamity. But, if you use it PROPERLY, it can enhance your life. Same with FIRE, same with DEBT.
Just because the money isn't sitting in a vault somewhere, don't make the mistake that you can't still SPEND it.
Master C
Posted By: Jake, the champion of the constitution
Date: 2009-02-12 15:30:15
Dear MC -
The problem is that the government won't let the bad debt, bad banks and firms go bankrupt and have their assets taken over by others. Most likely the derivatives hanging over many of the major banks will eventually wipe them out.
And watch out for commercial mortgages, glad someone is optimistic! :)
Take care, Jake
Posted By: GG
Date: 2009-02-23 10:45:16
Hey Master C,
I'd love to hear you extoll the fiat money system after the current depression in progress renders you jobless, homeless and starving to death.
"The worst kind of slave is the one who doesn't even know that he is one".
Posted By: Eliezer
Date: 2009-03-02 10:46:13
Fiat, fractionalized banking, undermines and destroys the purchasing power of the earned dollar. Todays tyranny of convenience is lulling people into legal servitude. Without control of currency or money, which is the current or energy of the people, there can be no representative government. The primary issue here, is the ownership and control of an interest bearing currency by a private banking cartel allegedly immune from oversight. This was/is the hope - that the masses will beable to be "managed" scientifically by a clerical elite. This will fail on the burden of ITS OWN ill-conceived notions. Ultimately, excercise of power from the top down, rather than empowerment of the people to be and do their best from the bottom up, never succeeds. In the final analysis, not only do the control freaks lose, we all do. Those who fail to learn from the past, are doomed to repreat its tragedies.
Posted By: TC
Date: 2009-03-05 21:56:16
To Master C - Glad to hear you bought your house for $38K with 20% down. Must have been the 1970s. I am a good deal younger (and smarter than you), yet I could not buy a house within 1 hour of my job because the average was $550K and a reasonable house was $900K. I make a lot of money, but that amount of debt was bananas and repugnant to my sensibilities (given rent). Homes had become so incredibly expense because of the cheap money policy of the Fed and expanstion of money and credit had eminated throughout the housing market (and heathcare and higher education). Luckily, my finance background and study of Austrian Economics in college gave me a sound basis to reject the rediculous home prices and wait for a time when your beloved banking system would retract (destroying many lives in the process). Things are pretty rough out there right now and the Fed enjoys a large share of the blame. You would have be believe we would not have Google in a free banking system. I say to you bullsh#t - you are brainwashed and likely much much poorer today given your misunderstanding. I hope you are enjoying that bigger house, I fear it may be dragging you down to the bottom of the ocean like a pair of cement shoes. And lose the smugness, it makes you look silly when events in the real world are proving you wrong - this is not a normal business cycle you fool. Worst of luck to you.
Posted By: Paul Benedict
Date: 2009-03-27 14:28:07
What a great, informative article. Do you discuss somewhere the relationship between the pressure for an emergency bailout the Fed's influence on President Bush and congressional leaders?
Posted By: Jake, the Champion of the Constitution
Date: 2009-03-28 10:14:49
Dear Paul -
Thanks a lot for your comments!
I haven't written specifically on the influence of the FED on Bush, but I did remark back at the beginning of October last year on why Congress even had to pass a bailout - since the FED has the unbrideled power to buy whatever the heck it wants anyways.
A real great read on the influence of the FED on the government is Rothbard's "The Case Against the FED" - although written about a decade ago or so, it's still pretty much dead on target. There is a link to it from this article
http://www.nolanchart.com/article5489.html