We had a debate on my youtube channel @herudaguru and this question came up. I asked chatgpt, and it gave me some good info. I decided to post it as an article or blog post. Enjoy.
The Federal Reserve Bank is often misunderstood, so here’s the clean, legally accurate breakdown—without myths or fluff.
Short answer
No one “owns” the Federal Reserve the way someone owns a private company.
It is a hybrid public–private system created by Congress, and Congress ultimately has authority over it.
How the Federal Reserve is structured
1. Created by Congress
- Established by the Federal Reserve Act of 1913
- Congress can amend, audit, or dissolve it
- Its powers come only from U.S. law
👉 That alone means it is not privately sovereign
2. Board of Governors (Public)
- 7 members
- Appointed by the President
- Confirmed by the Senate
- Serve long terms (14 years) to reduce political pressure
- Federal employees
This is the top authority of the Fed system.
3. 12 Regional Federal Reserve Banks (Quasi-public)
Examples:
- Federal Reserve Bank of New York
- Federal Reserve Bank of Atlanta
- Federal Reserve Bank of Chicago
These are where confusion starts.
Member banks:
- Commercial banks are required (or choose) to hold stock in their regional Fed
- This stock:
- Cannot be sold
- Cannot be traded
- Does not confer control
- Pays a fixed, limited dividend (not profit-based)
👉 This is not ownership in the normal sense
4. Who controls policy?
Not private banks.
Monetary policy is set by the FOMC (Federal Open Market Committee):
- 7 Board of Governors (public)
- 5 regional Fed presidents (rotating)
The Board of Governors always holds the majority vote.
Where does the Fed’s money go?
After operating costs:
- The vast majority of profits are returned to the U.S. Treasury
- In recent decades: trillions sent back to the government
A private corporation would keep profits — the Fed does not.
So why do people say “private bankers own the Fed”?
Because:
- The regional banks are legally structured like corporations
- Member banks hold non-transferable “stock”
- The system is intentionally insulated from daily politics
- It controls money creation (which triggers sovereignty concerns)
This creates a real philosophical debate, but not legal private ownership.
Accurate summary (no spin)
| Question | Answer |
|---|---|
| Who owns the Fed? | No private owner |
| Is it federal? | Yes, created & governed by Congress |
| Is it fully government-run? | No, it’s a hybrid system |
| Do private banks control it? | No |
| Can Congress end or change it? | Yes |
Deeper truth (important)
The real debate isn’t ownership — it’s monetary sovereignty:
Who should control money creation:
elected government, independent technocrats, or markets?
That debate goes back to:
- Jefferson vs Hamilton
- Jackson vs the Second Bank
- Lincoln’s Greenbacks
- Modern central banking
If you want, I can:
- Break this down from an Indigenous sovereignty / treaty-law lens
- Compare the Fed to central banks globally
- Show how money is actually created today
- Or map who benefits vs who bears the cost
Just tell me which angle you want next.
I had another follow up question….
why was it really created and was it good. Who ultimately profits, and break down the following in chart and diagra,s Break this down from an Indigenous sovereignty / treaty-law lens Compare the Fed to central banks globally Show how money is actually created today Or map who benefits vs who bears the cost
You’re basically asking 4 big questions at once: why the Fed was created, whether it’s been “good,” who profits, and how this looks through sovereignty/treaty law + globally + in today’s money-creation mechanics. Here’s a structured breakdown with charts + diagrams.
1) Why the Fed was really created
Stated purpose (in the law)
The Federal Reserve Act’s purpose (in plain English) was to create a system that could:
- provide an “elastic currency” (money supply that can expand/contract as needed),
- improve banking supervision, and
- reduce panic-driven collapses. Wikipedia+1
The practical driver: repeated banking panics (especially 1907)
After the Panic of 1907, Congress concluded the U.S. couldn’t keep relying on ad-hoc rescues by powerful private financiers. Congress passed the Aldrich-Vreeland Act (1908), created the National Monetary Commission, studied European central banking, and that reform pipeline ultimately fed into the Federal Reserve Act (1913). Federal Reserve History+2Federal Reserve Bank of New York+2
Translation: it was built to stop “credit freezes” and bank runs from repeatedly wrecking the economy.
2) Was it “good”? (depends what you measure)
A quick scorecard
| Goal | What improved | What problems remained / tradeoffs |
|---|---|---|
| Stop bank panics | Fed created a standing “lender-of-last-resort” framework; supervision improved over time. Federal Reserve History | The U.S. still had major crises (Great Depression, 2008, COVID-era shocks). |
| Stabilize prices | Modern Fed targets inflation/maximum employment via FOMC rate policy. Federal Reserve | Tight policy can raise unemployment; loose policy can inflate assets. |
| Smooth the business cycle | Faster crisis tools (liquidity facilities, open market operations). Federal Reserve | Policy can amplify inequality via asset channels (stocks/housing). |
| Democratic accountability | Board of Governors (public officials) holds majority on FOMC. Federal Reserve | Fed is insulated from elections by design, which many see as a legitimacy problem. |
So: good at preventing old-style 1800s-style “no backstop” banking collapses, but not a magic shield—and the distribution of benefits/costs is contentious.
3) Who ultimately profits?
Where the Fed’s “profits” go (system-level)
By law and practice, Federal Reserve Banks remit residual net earnings to the U.S. Treasury after costs/dividends/surplus limits. Federal Reserve+1
Historically, remittances were large (e.g., 2011–2021 over $920B per St. Louis Fed analysis), but in recent years remittances turned negative because high interest rates increased what the Fed pays on reserves relative to what it earns on older bonds. Federal Reserve Bank of St. Louis+1
“Profit” vs “benefit” are different
Even if the Treasury receives net earnings in normal times, private actors can benefit strongly through:
- Asset price channels (stocks, housing) when policy is easy,
- Credit access when liquidity is abundant,
- Interest on reserves paid to banks and some institutions during certain regimes (a political flashpoint). Reuters+1
4) Charts + diagrams
A) “Who benefits vs who bears the cost” map
| Policy channel | Likely beneficiaries | Likely cost-bearers |
|---|---|---|
| Lower rates / QE-like easing | Borrowers; asset holders; governments (cheaper borrowing) | Savers on fixed income; renters (if housing inflates) |
| Higher rates / tightening | Savers (higher yields); inflation fighters | Borrowers (mortgages/loans); job seekers if unemployment rises |
| Crisis liquidity backstops | Financial system stability; firms that keep credit lines | Households if bailouts feel one-sided; small firms if credit still tight locally |
| Bank-created credit expansion | Banks (interest income); borrowers who qualify | Communities with weak banking access (credit deserts) |
B) Money creation today (the real mechanism)
The modern reality: commercial bank lending creates deposits—money is mostly created “endogenously” through credit creation, not by printing cash. This is explained very clearly by the Bank of England: banks don’t simply lend out existing deposits; loans create deposits. Bank of England+1
Diagram: how a bank loan creates money
(1) You sign a loan
|
v
(2) Bank books:
Asset: +Loan
Liability: +Deposit (your account)
|
v
(3) New deposit spends into the economy
|
v
(4) Bank later finds needed reserves/liquidity
(payments system, interbank markets, central bank tools)
Central bank policy still matters because it sets the price of reserves / policy rate and influences incentives and constraints on lending, but it’s not a simple “money multiplier” story. Bank of England+1
5) Indigenous sovereignty / treaty-law lens
Core legal frame
- Treaties are the “supreme Law of the Land” under Article VI. Congress.gov+1
- The U.S. recognizes a federal trust responsibility toward tribes (discussed by DOI/BIA, and rooted in Supreme Court doctrine). Indian Affairs+1
- Foundational cases shaping federal–tribal relations include Cherokee Nation v. Georgia (1831) and Worcester v. Georgia (1832). Justia Law+2{{meta.siteName}}+2
Where the Fed intersects this reality (practically, not symbolically)
Even though treaties/trust obligations are federal responsibilities, monetary policy affects the material ability to exercise sovereignty, because it shapes:
- access to credit for housing, infrastructure, and enterprise,
- the cost of capital for tribal governments and tribal businesses,
- community banking availability (many tribal communities are underserved by financial institutions). Federal Reserve History+1
Diagram: “Sovereignty → Capacity” channel
Treaty rights + self-government (legal sovereignty)
|
v
Capacity to execute (roads, housing, courts, services)
|
v
Access to capital + stable banking relationships
|
v
Fed policy changes credit conditions nationwide
(but unevenly—credit deserts feel it more)
Key Indigenous critique (in policy terms):
If monetary tightening hits places that already face structural barriers to credit, it can function like a de facto constraint on self-determination—without any formal treaty renegotiation—because the constraint arrives through financial plumbing rather than overt legal action. The Fed itself has acknowledged patterns of under-service and barriers to credit in Native communities in historical/community-focused writing. Federal Reserve History
6) Comparing the Fed to central banks globally
Ownership / structure snapshot
| Central bank | “Who owns it?” | Notes |
|---|---|---|
| United States (Fed System) | Regional Reserve Banks have member-bank “stock,” but policy is governed by the public Board + FOMC structure. Federal Reserve+1 | Hybrid design; profits usually remitted to Treasury. Federal Reserve |
| Euro Area (ECB) | Owned by national central banks (NCBs) of EU states via a capital key. European Central Bank+2Banco de España+2 | Clear public-sector shareholder structure (NCBs). |
| Japan (BoJ) | Government must hold at least 55% of capital; remaining shares trade OTC, with limited governance power. Wikipedia | “Partly privately held” structurally, but operational independence is statutory. |
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