Don't like to read?
Recent news has asked the question, is the Federal Reserve System too big as a privately owned corporation? Although Fox News is the only media service to bring up the matter on a grand forum to the public, other individuals have been portraying concern over how powerful the Federal Reserve is as a bank, system, or banking system.
The Federal Reserve is made up of a Board of Governors, 12 member banks, and 25 branches which work together to supply a reserve of funds. Overall, it is designed to promote economic growth and monetary policy as it works with the U.S. Treasury Department. Although the Federal Reserve follows both public and private policies, it serves as an institution to not only insure other banks, but assist the government through the Federal Open Market Committee, the printing of currency, and the regulation of other financial institutions.
Steve Forbes of Fox News brings attention to how powerful the Federal Reserve has become as an institution. In a recent opinion report, Forbes compared the Federal Reserve’s monetary power to that of the Second Bank of the United States formed in the 1800s. Forbes stated Andrew Jackson fought hard to destroy the Second Bank so that it was not a threat to democracy. Forbes is arguing the same treatment should be applied to policies of the Federal Reserve.
Forbes stated the Federal Reserve started with a “microprudential approach” aiming to keep business with other financial institutions small. However, over the course of years and relations with other banks, and investment companies, the Federal Reserve has grown to be a system of seemingly relentless influence and power. Over time, it became notoriously known as the Central Bank of the U.S.
According to former banker and journalist Marilyn MacGruder Barnewall, the Federal Reserve banking system started in Jekyll Island during 1910. In 1913, the institution was adopted into the Federal Reserve Act. Barnewall claims there is a query whether all Congressmen were present to vote on the bill on December 22, 1913 as she implies members of Congress were home for the holiday week, so the act might not have been legally established.
Barnewall stated in an opinion on the News with Views website there is a difference between the U.S. Treasury Department and the Federal Reserve System. She noted the Constitution gives powers to Congress to establish a taxing system, regulate monetary policy, and borrow against the National Debt, among other things. After the Federal Reserve Act was signed into law, it gave an entity called the Federal Reserve the duty of not only printing money, but the power to expand credit. And, since it is backed by Congress until this day, it has maintained prestige and power to rule over all U.S. banks, whether directly or indirectly, Barnewall claimed.
Barnewall stated the Federal Reserve is a “private money monopoly” consisting of member banks, and apparently, the federal government as a client. Although seven governors are nominated by the President and confirmed by the Senate to hold seats as Board of Governors of the Federal Reserve, Barnewall claims taxes from the government (or, the people) go to interest charged by the Federal Reserve for “the right to borrow money.” Barnewall suggested the establishment of the Federal Reserve can best be described by President Woodrow Wilson who was president at the time. He was quoted as saying the power of an industrial nation was given to the hands of a few men in the form of a “system of credit.”
If the Federal Reserve is too big as a private institution, then why are taxpayers supporting it through Congress indirectly, and why is it seemingly in debt? The 2008 bailout of banks may have something to do with it, but for the most part, the Federal Reserve might be issuing more credit than it can print, particularly to assist private banks.
Ellen Brown of Global Research mentioned in an opinion report that in March of 2008 the New York branch of the Federal Reserve advanced funds to J.P. Morgan Chase Bank so the bank could obtain an investment bank called Bear Stearns. According to Brown, this deak was controversial since Jamie Dimon, the CEO of J.P. Morgan is also on the board of the N.Y. Federal Reserve. Among other acquisitions, Brown pointed out that most people thought the $700 billion government bailout meant the federal government was acquiring financial institutions to save them from failure after the housing crisis which hit in 2008.
Brown stated ordinarily the Federal Reserve trades “notes” (dollar bills) with the government for “pink pieces of paper” called U.S. Treasury bonds to assist Congress with funds it cannot achieve through taxes. Since 2008, however, the Treasury Department has been issuing bonds not for the government’s use, but for the Federal Reserve. Brown claims “triple-A” securities have been issued by the government in exchange for “toxic derivative debt” acquired by the Federal Reserve as a result of financial institutions burdened by the housing crisis. Like these financial institutions, or private banks, the Federal Reserve is also being saved by the federal government in order to rebuild reserves and make “new loans,” but at the expense of taxpayer money.
Brown suggested that since the Federal Reserve is not a federal agency, taxpayer money is going to a private institution that has been given power by the appropriations of Congress. Although Congress can change the “responsibilities of the statute” of the Federal Reserve, it most likely will not do so unless taxpayers demand a change. Barnewall and Forbes argue the same idea in hopes of making the Federal Reserve more transparent and in finding alternatives to supply money without an interest rate or serve private interests.
Although the Federal Reserve is appropriated by Congress for monetary policies and other responsibilities, it also exchanges credit with the U.S. Treasury Department to either collect interest for services rendered, or to purchase government bonds through “open market operations,” giving private financial institutions more privileges than taxpayers. Though Congress gives power to the Federal Reserve to “handle the Treasury’s payments, sell government securities and assist with the Treasury’s cash management and investment activities,” the Federal Reserve System might just be another financial firm too big to replace.
Opinion by Liz Pimentel