Is the Federal Reserve a private bank?
There is a common misconception that the Federal Reserve System is privately owned; while its Board of Governors is a government agency, the regional Federal Reserve Banks are set up like private corporations.
The Federal Reserve System is not "owned" by anyone. The Federal Reserve was created in 1913 by the Federal Reserve Act to serve as the nation's central bank. The Board of Governors in Washington, D.C., is an agency of the federal government and reports to and is directly accountable to the Congress.
So is the Fed private or public? The answer is both. While the Board of Governors is an independent government agency, the Federal Reserve Banks are set up like private corporations. Member banks hold stock in the Federal Reserve Banks and earn dividends.
Many people are surprised to learn that the central bank of the United States, the Federal Reserve ("the Fed," for short), operates for the most part independently of the federal government. But the Fed is also a quasi-governmental agency with a board of governors selected by the President and approved by Congress.
Although an instrument of the U.S. government, the Federal Reserve System considers itself "an independent central bank because its monetary policy decisions do not have to be approved by the president or by anyone else in the executive or legislative branches of government, it does not receive funding appropriated by ...
The Board of Governors--located in Washington, D.C.--is the governing body of the Federal Reserve System. It is run by seven members, or "governors," who are nominated by the President of the United States and confirmed in their positions by the U.S. Senate.
Federal Reserve Banks' stock is owned by banks, never by individuals. Federal law requires national banks to be members of the Federal Reserve System and to own a specified amount of the stock of the Reserve Bank in the Federal Reserve district where they are located.
- 01-Boston.
- 02-New York.
- 03-Philadelphia.
- 04-Cleveland.
- 05-Richmond.
- 06-Atlanta.
- 07-Chicago.
- 08-St. Louis.
The stockholders in the 12 regional Federal Reserve Banks are the privately owned banks that fall under the Federal Reserve System. These include all national banks (chartered by the federal government) and those state-chartered banks that wish to join and meet certain requirements.
The Federal Reserve Act requires the Reserve Banks to remit excess earnings to the U.S. Treasury after providing for operating costs, payments of dividends, and an amount necessary to maintain surplus.
What is the controversy with the Federal Reserve?
Critics have questioned its effectiveness in managing inflation, regulating the banking system, and stabilizing the economy. Notable critics include Nobel laureate economist Milton Friedman and his fellow monetarist Anna Schwartz, who argued that the Fed's policies exacerbated the Great Depression.
The Federal Reserve System is considered to be an independent central bank. It is so, however, only in the sense that its decisions do not have to be ratified by the President or anyone else in the executive branch of the government. The entire System is subject to oversight by the U.S. Congress….
The Fed is an independent government agency but accountable to the public and Congress. The chair and Board of Governor's staff testify before Congress and submit a Monetary Policy Report twice a year. Independently audited financial statements and FOMC meeting minutes are public.
There is a common misconception that the Federal Reserve System is privately owned; while its Board of Governors is a government agency, the regional Federal Reserve Banks are set up like private corporations.
The Federal Reserve is not funded by congressional appropriations. Its operations are financed primarily from the interest earned on the securities it owns—securities acquired in the course of the Federal Reserve's open market operations.
Cons of the Federal Reserve
The Federal Reserve operates independently of the U.S. government, and its monetary policy decisions are not approved by Congress or the U.S. president. This independence helps the Fed operate free of political pressure, but it also limits the Fed's accountability.
The president may not have the legal authority to dismiss a chairman before the end of a term, although this assumption has never been tested in court. The current chairman is Jerome Powell, who was sworn in on February 5, 2018.
It took many months and nearly straight party-line voting, but on December 23, 1913, the Senate passed and President Woodrow Wilson signed the Federal Reserve Act.
Federal Law Enforcement Officer
Provide advanced law enforcement protection services to Federal Reserve Bank facilities, whether owned or leased. Respond to police, fire, and medical incidents in and adjacent to their assigned facilities to protect life, render aid or assist other law enforcement.
| Current governor | Party | Term expires |
|---|---|---|
| Michael Barr (Vice Chair for Supervision) | Democratic | January 31, 2032 (as Governor) |
| Michelle Bowman | Republican | January 31, 2034 |
| Christopher Waller | Republican | January 31, 2030 |
| Lisa Cook | Democratic | January 31, 2038 |
In what ways is the Fed privately owned but publicly controlled?
Although the Reserve Banks are technically private corporations with their own boards of directors, they are overseen by a board (today, the Board of Governors of the Federal Reserve System) comprised of government appointees, and the shareholder rights of the System's member banks are limited and tightly regulated.
Federal Reserve Banks are often called the "bankers' banks" because they provide services to commercial banks similar to the services that commercial banks provide for their customers. Federal Reserve Banks distribute currency and coin to banks, lend money to banks, and process electronic payments.
U.S currency is produced by the Bureau of Engraving and Printing and U.S. coins are produced by the U.S. Mint. Both organizations are bureaus of the U.S. Department of the Treasury.
No. Federal Reserve Bank employees are not government employees; however, Board of Governors employees are considered government employees. Each Reserve Bank determines its own benefits and human resources policies, and employees are paid as part of the expenses of their employing Bank.
A particularly severe panic in 1907 resulted in bank runs that wreaked havoc on the fragile banking system and ultimately led Congress in 1913 to write the Federal Reserve Act. The Federal Reserve System was initially created to address these banking panics.
