Quote from Haroki:
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 other words, the Fed has never set any poilcy that would devalue the dollar. Our govt has.....
Here's some history about wht the Fed system was enacted:
Prior to the Civil war there were thousands of banks in operation throughout the Union, all of them chartered, that is, licensed by the state governments. Banking regulations were virtually nonexistent. The federal government had no meaningful controls on banking practices, and state regulations were spotty and poorly enforced at best. Economic historians call the era leading up to the Civil War as the 'state banking era' or the 'free banking era.'
The 1907 Banking Panic
The 1907 crisis, also called the Wall Street Panic, was especially severe. The Panic caused what was at that time the worst economic depression in the countryâs history. It appears to have begun with a stock market crash brought about by a combination of a modest speculative bubble, the liquidity problem, and reserve pyramiding. Centered on New York City, the scale of the crisis reached a proportion so great that banks across the country nearly suspended all withdrawals -- a kind of self-imposed bank holiday. Several long-standing New York banks fell. The unemployment rate reached 20 percent at the peak of the crisis. Millions lost their deposits as thousands of banks collapsed. The crisis was terminated when J.P. Morgan, a man of sometimes suspicious business tactics and phenomenal wealth, personally made temporary loans to key New York banks and other financial institutions to help them weather the storm.
The Federal Reserve Act of 1913
Following the near catastrophic financial disaster of 1907, the movement for banking reform picked up steam among Wall Street bankers, Republicans, and eastern Democrats.The legislation that eventually emerged was the Federal Reserve Act, also known at the time as the Currency Bill, or the Owen-Glass Act. The bill called for a system of eight to twelve mostly autonomous regional Reserve Banks that would be owned by the banks in their region and whose actions would be coordinated by a Federal Reserve Board appointed by the President. The Boardâs members originally included the Secretary of the Treasury, the Comptroller of the Currency, and other officials appointed by the President to represent public interests. The proposed Federal Reserve System would therefore be privately owned, but publicly controlled. Wilson signed the bill on December 23, 1913 and the Federal Reserve System was born.6
Conspiracy theorists have long viewed the Federal Reserve Act as a means of giving control of the banking system to the money trusts, when in reality the intent and effect was to wrestle control away from them. History clearly demonstrates that in the decades prior to the Federal Reserve Act the decisions of a few large New York banks had, at times, enormous repercussions for banks throughout the country and the economy in general. Following the return to central banking, at least some measure of control was removed from them and placed with the Federal Reserve.
And a little on the organization of the Fed system :
The Federal Reserve System is sometimes described as a quasi-government agency because it contains elements of both the private sector and of government control. The System has three organization levels: member banks, Federal Reserve Banks, and the Board of Governors. Let's examine each briefly.
Member banks are at the bottom of the organization chart. These are commercial banks and S&Ls who have joined the Federal Reserve System (FRS).Why are member banks -- the owners -- at the bottom of the organization chart? They are at the bottom because unlike the shareholders of a typical corporation such as IBM, member banks have very little power over how their regional Federal Reserve Bank is run. And they have no control at all over monetary policy.
At the middle level in the organization chart are the 12 regional Federal Reserve Banks. They have a variety of powers and duties, some of which are:
Buy and sell government bonds in the secondary markets (open market operations)
Lend reserves to member banks
Offer check-clearing services to member and non-member banks
Issue Federal Reserve Notes and collect worn-out ones for destruction
Enforce reserve requirements and other regulations of the member banks
Monitor banking and economic activity within their respective district
Finally, at the top of the structure chart is the Board of Governors. The Board is a 7-member panel who is appointed by the President of the United States and confirmed by the Senate. Among its responsibilities:
Determine open market policies
Set the required reserve ratio for member banks
Set the Discount Rate
Deciding how much new currency to print
Monitor the health of the U.S. economy
Report to Congress periodically on the state of the U.S. economy
It's single most important duty is deciding its open market policy, that is, whether it should order the Federal Reserve Banks to buy or sell government bonds, and if so, how much. This decision is made in conjunction with the Federal Open Market Committee. The FOMC is a 12-member panel can consists of all the Board members, the president of the New York Federal Reserve Bank, and 4 presidents from the other Federal Reserve Banks on a rotating basis. The presidents are appointed by each Bank's board of directors, pending approval from the Board of Governors.
Thus, all the key monetary policy decisions -- the ones that affect interest rates -- are made by a government agency whose members are selected by the President of the United States. The Fed may be privately owned, but it is controlled by the government.
