The Federal Reserve Replies on its Stock Ownership and Treasury Purchases
As a follow-up investigation to a previous article "Who Owns the FED" on the share ownership of the FED yields results. by Jake Towne, the Champion of the Constitution
(libertarian)
Saturday, February 28, 2009
This article is in two parts and I will shortly update my article "The Money Matrix - Who Owns the FED (PART 7/15)". The first part consists of email excerpts with Ms. Debra LaBarbera from the department of Media Relations and Public Affairs for the Federal Reserve Bank of New York, who kindly took the time to reply to my inquiries. As I have noted elsewhere, although I have written very close to a hundred letters (in my view, the majority overly respectful), to my California Congresswoman, I never been deigned worthy of a response, but the Federal Reserve has, I must say, always responded. (emblem)
The second part consists of some guesswork (which I explain and submit to you for your review and criticism) to estimate the percentage of share ownership of the major banks that own the private stock in the Federal Reserve Bank, the quasi-private banking cartel that runs America's central bank.
Me: Could you please assist me on a couple questions?
1) I am aware that the Federal Reserve may purchase or sell Treasuries from its primary dealers. Can the Federal Reserve purchase these directly from the Treasury Department? If so, has this ever occurred before? Why would the Federal Reserve purchase these from the primary dealers and not the Treasury Dept?
2) Could you please send me a list of member banks for the Federal Reserve Bank of New York, 2nd district? If a list of member banks for other districts is available, I would appreciate it if you could send me these as well.
LaBarbera: Thank you for your recent inquiry. The Federal Reserve, as the banker for the Treasury Department, issues transfers, redeems and pays interest on US Government securities. Also, the Fed will make interest payments or pay off maturing obligations such as Treasury notes, bonds, and bills.
Also, when securities in the SOMA portfolio [SOMA = System Open Market Account, or those charged with implementing OMO, or Open Market Operations (creating or destroying money from thin air) from the FOMC, or Federal Open Market Committee - Jake] mature the Desk determines whether to reinvest the maturing proceeds into new Treasury debt issued at primary auction, or to redeem the maturing proceeds. Typically the proceeds are reinvested, which would maintain the size of the SOMA portfolio and therefore the size of the permanent reserve-adding nature of the portfolio.
Whereas, the Fed purchases and sells securities directly from primary dealers in order to influence the volume of money and credit in the economy. So when the Fed sends and receives funds from the primary dealer's account at its clearing bank, this action adds or drains reserves to the banking system.
For more information on Open Market Operations I recommend our Fedpoint, found on our website at the link below: [link edited for length]
A list of commercial banks in the United States can be found on the Board of Governors website at the link below. Please be advised, that this is a list of all commercial banks, which includes non-member banks. The column title "Charter" designates the banks and you will be able to determine which banks are members. [link edited for length]
Let me know if you have any questions.
Me: Thank you very much for your reply! Only one of my initial questions remains. Can the Federal Reserve lawfully purchase or sell Treasuries directly with the US government - ie not involve the primary dealers? Has this ever happened before in the history of the Federal Reserve?
LaBarbera: Yes, when proceeds are reinvested, the auctions are directly with the Treasury not primary dealers.
So, the answer to a question that readers have asked me here "The Money Matrix - How the FED Works (PART 6/15)" is that YES, the FED may transact Treasuries directly with the Treasury Department but typically does notdo this except in the event of refunding its earnings from its Treasuries back to the government (as explained here) since these transactions are typically done with the primary dealers (list here) such as JP Morgan, Goldman Sachs, Citigroup to manipulate, and usually increase, the money supply of dollars, which is the Austrian definition of inflation. However, please be wary as in today's economic times "typically does not" typically does not apply!!
Now, why are these Treasuries transactions important for you? Please allow a short digression.
Over the long-term to the average American, this shows up as increases in prices of goods and devalues the purchasing power of their salaries even if the nominal number of salary dollars is increasing. A great writer I follow, James Quinn, recently published an interesting set of graphs in this article "As General Motors Goes..." where he demonstrates that from 1947 until 1970 real American median incomes rose by 3.7%, but from 1979 until 2006 real American median incomes only rose by 0.3%. While money supply increases by the FED masked this drop, it also masked the hollowing out of America's manufacturing base.
For no matter how important the jobs of teachers, doctors, policemen and firefighters are, the only way to increase the wealth of a nation is to generate higher amounts of goods (and yes, services also have a supporting role). As Peter Schiff mentions in his latest "Obama Puts the Economic Cart Before the Horse," if a fairy godmother showed up and gave all of us as many dollars, or Federal Reserve Notes, as we desired, we would very quickly find that we would be unable to increase our wealth at all! Hypothetically, if the supply of dollars were held constant and the overall manufacturing efficiency rose due to capital accumulation from true savings, the purchasing power of each dollar would rise, giving birth to the saver's benefit and central banker's horror, for this is what they widely refer to as "deflation." Per bls.gov, in January 2009 America, with a workforce 140-million strong, is now in the ridiculous situation of having those with manufacturing jobs (12.7 million) vastly outnumbered almost 2:1 by our (economically-speaking) non-value-added government employees (22.5 million).
"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."
Therefore, if one knew all of the Federal Reserve members, plus their "capital and surplus" you could calculate the stock ownership of each bank in the FED. In the link, LaBarbera supplied, she is actually incorrect in that this is a list of "all commercial banks" as of December 2008. It is only a list of those US FDIC-insured commercial banks with consolidated assets of $300 million or more. Per page 9/40 of the FDIC's September 2008 quarterly, the total assets of the 7,146 commercial banks was $12.1 Trillion, while the list provided by the FED has 1,716 banks with consolidated assets of $11.1 Trillion. From this information, I conclude that remaining 5,000-odd banks' assets will not be terribly significant as the list LaBarbera sent covered >92% of the FDIC total. Per the FDIC, the remaining 1,238 savings institutions only account for another $1.5 Trillion, and are not consequential compared with the commercial banks.
If you accept this premise, then the great thing about the list is that if you remove all of the state non-member banks (marked 'SNB'), what you are left with is a list of the 771 key members of the Federal Reserve System. What I did next was consolidate the major banks as a few of the top members such as Bank of America Corporation and Wells Fargo and Company had multiple line items.
Now, the work completed can only be an approximation, and just being a silly engineer and not a banking expert, I have also made a bit of leap in equating the assets from LaBarbera's source with the banks' capital and surplus. I would appreciate if there are any comments on the validity of this. I decided to use the domestic assets, not the consolidated (international) assets. The only effect on the data is that this significantly reduces the overall influence of JP Morgan Chase Bank and Citigroup, which hold large amounts of oversea assets, as can be seen below.
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, 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 above also includes Bank of America, JP Morgan Chase, Citigroup, and HSBC.
Comments, thoughts? I'll share my Excel file with anyone else wanting to take a look.
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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Posted By: Jake, the champion of the constitution
Date: 2009-03-01 07:19:45
Some feedback from elsewhere, interesting points;
Reader A: if those are the member banks that own stock in the federal reserve.. the real question is: who are the major stock holders in the member banks? b/c wouldnt the largest shareholders in the member banks be sort of the largest shareholders in the federal reserve? Do i make any sense? It just seems to me the largest shareholders in member banks would "own" the fed...
Reader B: Yes...what is the underlying ownership structure? Things can be structured legally in such a way that what appears on paper as stock holdings does not tell the whole story or tells it misleadingly. That's the problem I have with the administration right now. The appointees are all drawn from the same circle. Even if technically they are acting "on their own" - there are any number of 'off-book' ways that they may be influenced We have an "off-book" economy...and government...
Reader C: I look at the major shareholders of Lehman: [link edited for length] nothing stands out... no really big owners... no major funds. Odd.
Vanguard.... now where have I heard that before.... and I find this on the search... [link edited for length]
More on Citibank from yahoo finance, top institutional holders. Firm name, % ownership.
STATE STREET CORPORATION 4.50 Barclays Global Investors UK Holdings Ltd 4.35 Capital World Investors 3.83 FMR LLC 3.23 VANGUARD GROUP, INC. (THE) 3.17 AXA 2.35 DODGE & COX INC 1.61 Capital Research Global Investors 1.52 JP MORGAN CHASE & COMPANY 1.06 Bank of New York Mellon Corporation 1.03
As most corporate ownership - its incestual. Start digging into these to find the next level. This is also a prime example of what I call 'control through fractional ownership'. Most of the owners here are OP, off this list - millions of small investors and funds. A handful of majors with only fractional percentage of the whole - control the company.
Reader D: I know that Saudi Prince Alwaleed bin Talal is the largest individual shareholder in Citigroup.. im not sure why it doesnt list him on yahoo. heres a vid of him talking about the bailout and what not... [link edited for length]
Posted By: Jake, the champion of the constitution
Date: 2009-03-02 04:14:23
Excerpt from an email sent to me:
Reader: I think you have confirmed what is known or at least mentioned by others on occasion. Of interest here is that the Treasury now owns some of these big banks and they own the FED so we have the Treasury indirectly owning the FED to some extent. What a mishmash. And then stir in the primary dealers.
This mishmash was noted even by Jefferson in the simpler situation of Hamilton's First Bank. Jefferson bemoaned the way that the financial system was integrated with the government. In addition, I am convinced that the complications of it for international finance and for economists in general is part of how this system perpetuates itself. Very, very few people could even understand some of the gimmicks of old like the Stabilization Fund. Even when Nixon went off gold, few people in those discussions even knew what they were doing. People seem to think there is conspiracy. But Nixon wanted there to be good times and no recession so he could get re-elected. Roosevelt was anti-bankers! The actual history of these affairs is different from any simple conspiracy theory.
Posted By: Frank Berezovytch
Date: 2009-03-02 16:20:21
Message: Well Jake, Over the years and from time to time I recall from reading articles on the Fed, that there are two types of stock. The type owned my the member banks are inconsequential, the type of real value is owned by individuals or members of the privileged few and not available for public trade. The charge, when put to the Fed, has never been deemed of merit(to them) for a reply. Were you aware of this and have you attempted to looked into this?
Posted By: Jake, the champion of the constitution
Date: 2009-03-02 19:57:07
Dear Frank -
Thanks you for your comment. The member banks actually DO have some leverage - although apparently from this article its the big banks who are also partly owned by the Treasury that have that leverage. Please check out the "Who Owns the FED" link above. As noted, this member bank stock is NOT listed for public trade.
I am aware of this separate stock rumor and have found absolutely nothing to substantiate it. In emails from the FED and their documents, there is no reference to this second type of stock. I also don't think there would really be any good reason for the second type to exist -- the FED's best assets are really the FOMC and Bernanke at the top. Control those people, our modern-day oligarchs, and you control the FED, forget about any stock issue.
Posted By: Jake, the champion of the constitution
Date: 2009-03-02 20:03:30
All - I received a reply from James Turk of goldmoney.com and former Chase banker:
Hi Jake I think your estimates are fairly accurate. I've never seen detailed data of the Fed's ownership, but understand that JP Morgan Chase alone owns approximately 30%, which is pretty much in line with your estimates. Regards James
This stuff all comes full circle when you look at the companies that own all the major media outlets including the big 5 that own TV and the big guys who own the papers and the radio.
With the TV especially it's pretty much all the primary dealers of the Federal Reserve.
At the very least it's a huge conflict of interest, at worst it's proof of the capitalist conspiracy
This article is in two parts and I will shortly update my article "
