Who Owns the Federal Reserve?

Good question here in the Ask Cullen page.  I get this one a lot so it’s worth some detailed explanation.

First, it helps to understand what the Fed really is.  The Federal Reserve System was modelled after the New York Clearinghouse that existed in New York during the 1800’s and 1900’s.  As its name states, the New York Clearinghouse was just a big clearinghouse where many of the big banks would come to settle their interbank payments.  Unfortunately, it wasn’t broad enough to handle the scope and complexity of the US banking system so these regional clearinghouses were deficient in dealing with banking crises and liquidity issues.  The Fed System took this private model and ramped it up into a public/private hybrid model to create a national clearinghouse for interbank payments.  You don’t hear much talk about this on a daily basis, but that’s really what the Fed is – it’s just a big clearinghouse to help smooth the payments system.  All the other stuff it gets attention for (like monetary policy) is just a sideshow to this primary purpose it’s serving – to maintain a healthy functioning payments system.

But the Fed is a weird entity when it comes to “ownership”.  It exists due to an act of Congress.  But it is also considered an independent entity because it is not part of the Executive or Legislative branches of government.   The Fed exists because Congress created it, but it doesn’t enact policy measures with any Congressional or Presidential approval.  Politically, this makes it a very independent entity.

The Regional Fed banks are arms of the Fed system that serve like regional versions of the NY Clearinghouse.   One thing that muddies this discussion on “ownership” is the issuance of stock by the regional Fed banks to the member banks.  This stock pays a fixed 6% dividend and gives the banks a claim on the Fed’s annual profits.   But let’s keep this in the right perspective.  Last year the Fed earned $90.5B.  Of this, $1.6B was paid out in dividends.  The remaining $88B was remitted back to the US Treasury.  While the US Treasury doesn’t technically own shares in the Federal Reserve the Fed is required to remit its profits at the end of the year back to the Federal Government.  As you can see, remittance often dwarfs any dividends paid back to the banks.  In other words, the US Treasury is the recipient of most of the Fed’s profits.

Let’s also not forget the primary purpose of the Fed.  Remember, the Fed exists to serve the payments system.  This means it is a supporter of the US banking system.  Before it can ever achieve its dual mandate on price stability and full employment the Fed must ensure the payments system is healthy.  Therefore, the Fed is often viewed as a servant to the banking system while also trying to be a public purpose servant.  It has, in effect, two masters by design.

The Federal Reserve system is an imperfect, but rather innovative clearinghouse.  Its structure as “independent within government” makes it hard to decipher precisely who owns it.  I prefer to think of the Fed as being an entity designed to help support the US payments system (which thereby makes it a bank facilitating entity) which serves public purpose and private purpose.  In other words, it’s better to think of the Fed as a public/private hybrid and not really being “owned” by anyone.


Who Owns the Federal Reserve – Federal Reserve

Federal Reserve Annual Report – Federal Reserve

The Federal Reserve in the US Payments System – Federal Reserve


Got a comment or question about this post? Feel free to use the Ask Cullen section, leave a comment in the forum or send me a message on Twitter.
Cullen Roche

Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services. He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance and Understanding the Modern Monetary System.

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  • JWG

    Who owns the trillions of dollars on the Fed’s balance sheet? If the Fed is dissolved by Congress tomorrow who gets the assets?

  • http://orcamgroup.com Cullen Roche

    Any profits would be remitted to the US Tsy after dividends are paid out. So the majority of it would go right back to the govt.

  • SS


  • http://jerrykhachoyan.com TheArmoTrader

    I’d add one thing to the stock ownership part.
    If I’m not mistaken, (national) banks are REQUIRED to buy into the stock. Also, Fed stock cannot be sold or traded.

    That doesn’t sound like “ownership” to me. Imagine if you were required to buy AAPL stock but could not trade or sell it. Ya you’d own a piece of it but you were really forced in by other entities.

  • Billiejones

    Is the Fed REQUIRED to remit profits to the treasury…..or has that just been the custom? I honestly don’t know. As “stockholders” i would think that whoever owns the equity would be technically entitled to profits…..whether they have actually been paid those profits is besides the point. At the end of the day equity owners vote, no?

    As an aside, I understand what you are saying here Cullen, but I personally find the history of the Fed and JP morgan to leave a bad taste in my mouth. I believe a central bank is necessary, but i don’t believe that private institutions should be entitled to 6% risk free perpetual dividends…..i know you are going to compare it to preferred stock, but my understanding is that it is actually closer to common. If the Fed takes a loss does the 6% dividend get cut?

  • Geoff

    Cullen, you have a reputation for being reasonable and well balanced. This post is a perfect example.

    Well done.

  • Dunce Cap Aficionado

    What is the purpose of the member banks receiving dividends? Regardless of the amount being small, why does a member bank that does not exist to generate profit need a share of the parent banks profit?

  • beowulf

    USG has both beneficial use of the Fed’s present income and a vested future interest (which USG can unilaterally trigger at anytime with a new law). If you set up a trust fund like this, the courts would say its a sham– you own the assets.

    The Fed’s legal status is so odd– a fourth branch of govt when the Constitution only goes to three– I think sooner or later its going to end up under the President’s thumb, Mick Jagger-style. For years, the Supreme Court has been trending towards the unitary executive doctrine– any exercise of executive power (which the Fed does every day) is subject to the President’s supervision and control.

    When the Court inevitably the hammer (it could be out of the blue in a decision about some other independent agency, the Nuclear Regulatory Commission, say), the President would surely delegate oversight to the Secretary of the Treasury, who would then govern both Treasury and the Fed in the same way the Secretary of the Navy governs both the Navy and the Marine Corps.

  • abc

    what a load of cr*p. do you own research and you will come to the same conclusion. the Fed does not serve the public interest but only the banking interest. keeping the interest rates artificially low for the banks and printing paper to wipe out savings. criminals at the helm, nothing more.

  • Ed Stephens

    I beg to differ. The Federal Reserve System was created by 9 or so of the world’s wealthiest bankers on Jekyll Island in 1910. The lawyers and lobbyists huddled for several days putting together the legislation for Congress to pass late in the evening during the Christmas break.

    The Federal Reserve Act of 1913 was never debated in Congress and the President, who had been compromised by that time, reluctantly signed this atrocity into law. Since then, the value of the US Dollar has decreased by 94%.

    The Fed also was instrumental in decoupling the dollar from the gold standard, when in 1964 Richard Nixon did just that, allowing the Fed to REALLY pump up the printing presses (and thus make more money by selling more money to the Treasury).

    C’mon folks, don’t be mislead by anyone who claims to know finance. I’m an IT guy but it doesn’t really matter because I can read and I read a lot.

    For more information concerning the Federal Reserve System and it’s correlation to every major war in the 20th century, please read End the Fed, by Dr. Paul.

  • JK


    about the Fed “keeping the interest rates artificially low”

    Not including the recent QEs etc…

    The Fed actually keeps interest rates artificially high, not low. If there were no open market operations, that would result in the banking system always being flush with Reserves, thereby pinning the interbank rate (FFR) constantly near zero. So the “natural” rate in our system minus Fed intervention is a (near)-zero interest rate policy, permanently. This of course assumes banks aren’t reserve-constrined, which they’re not, and the Fed acts as a lender of last resort, etc. But if you want to imagine a world where banks really do just lend out people’s deposits – e.g. 100% required reserves, etc. – well then you’re just talking about a fundamentally different world than we live in; a fiction.

    Whether or not the Fed’s policies “serve the public interest” is another issue though. I’d say it serves the public’s interest in so far as it maintains a smooth functioning payments system (this is incredibly important and often taken for granted), but it does a terrible job at serving the public’s interest via regulating the financial sector (surprise surprise).

    I’d rank the Fed’s roles in order of importance:

    (1) Maintain a smooth functioning payments system
    (2) Properly regulate the financial sector
    and a waaaay distant third
    (3) Conduct monetary policy to promote maximum employment and price stability.

    I think (3) should mostly be done via fiscal policy. Let’s turn this over to Congress and tell the Fed: just (1) maintain a smooth functioning payments system and (2) regulate the financial industry. (1) is easy enough for them. An active and critical Congress is probably necessary for (2).

  • Johnny Evers

    It’s a federal agency.
    The key personnel are appointed by the President and confirmed by Congress. The president also meets weekly with the Fed chief (Bush did, not sure if Obama continued this) and can exert pressure on him this way.
    Really, there are many ‘independent agencies’ that no one would argue are really independent. The CIA is an independent agency. So is NASA and the post office.
    They are outside the three branches, true, but part of the government.

  • Geoff

    Seems like you read a lot of austrian/libertarian/goldbug literature but not much else. Try reading “Understanding the Modern Monetary System”, which you can find at the top of this page.

  • abc

    so you have no problem with not letting the market dictate the cost of money, ie, the interest rate? and you really think that the Fed is working for the public good by printing billions of dollars? amazing…

  • Johnny Evers

    When people say the Fed is keeping rates low, they are usually referring to savings, CDs, fixed annuities, things like that …. mortgage rates, too.
    Do you think the Fed has the ability to do this?
    It is certainly their announced intention.

  • Anonymous

    Rand Paul May Block Yellen Confirmation….. Finally someone is stepping up to block the train wreck!


  • AK

    I am confused!

    If the FED is serving the private banks then why is it funded by us taxpayers? Don’t you think the private banks should “pool” in the money for any future financial crisis?

    The way I see it that FED wants to have it both ways which is to say it is both private/public entity. Private when it comes to profits and public when it comes to losses! Simple!

  • Geoff

    I don’t believe the Fed is funded by taxpayers in any significant way. Remember, the Fed has a printing press. If anything, you could argue the reverse, that the Fed funds the taxpayers!

  • LVG

    I used to think this view was wrong, but after years of reading your work I’ve learned that disagreeing with you is usually pretty stupid.

  • Mark A. Sadowski

    There are approximately 70 independent establishments and government corporations in the U.S. government:


  • http://brown-blog-5.blogspot.com Tom Brown

    From Mark A. Sadowski:

    “Suppose the Senate fails to confirm Yellen to the Chair. Janet Yellen’s term as Governor doesn’t expire until January 31, 2024.

    In the absence of a Chair, the Vice Chair serves as Chair. Therefore, if Bernanke resigns from the Board before the end of his term as Chair, as he has indicated he might do, Yellen would serve as acting Chair until January 31, 2014. If there is still no Chair when her term as Vice Chair expires, the rest of the Board must elect a Governor to act as Chair pro tempore.

    http://www.federalreserve.gov/aboutthefed/section%2010.htm especially part 4

    Furthermore how many Governors will there be come January 31?

    1) Duke resigned at the end of August.
    2) Raskin resigned to become Deputy Treasury Secretary.
    3) Powell’s term expires on January 31, 2014.

    If Bernanke resigns as Governor (his term as Governor doesn’t expire until January 31, 2020) that leaves only Stein, Tarullo and Yellen to decide who among them will become the Chair pro tempore.

    Under those circumstances who do you think will end up being the Chair?

    Yellen of course.”


  • Suvy

    Thank God.

  • JWG

    The Fed is an instrumentality of the United States government. It manages its balance sheet but does not own the assets on it. Its “independence” is at the sufferance of Congress and its management is appointed by the Executive Branch. The idea that it is something other than a creature of the federal government is mostly a fantasy of the far right, who think that the Rothschilds run it. Its nominal independence was exposed as an illusion during and after WWII, when it financed the war with printed money and kept rates fixed for years afterwards at the direction of the Treasury.

  • DanH

    The fed isnt funded by the government.

  • http://www.fanbrowser.com/ Cowpoke

    In simple terms, The FED is like the same Govt/Public sanctioned institutionalized arms of our American culture.
    Example, FED=MLB=NFL=NBA=NHA, The FED is simply a Govt authorized and people sanctioned governing authority over the banking sector. Just as the NFL,MLB,NBA, NHL are over our male testosterone fueled battle field entertainment.

    It’s not Rocket Science folks, Think about it. Just as much testosterone is put into the mkt as there is into sports books and fantasy games.

  • Benjamin Cole

    Right…sort of.

    When the Fed sells its hoard of QE bonds, it must extinguish the cash received…or, if the Fed holds bonds to maturity, it then must extinguish the principle it receives….

    I contend this is bad policy. The stimulative effect of money creation is muted, as the public knows it will eventually be uncreated….

    Also, the chance for huge tax cuts i slost under this accounting system…if the Fed could simply sell the bonds, and transfer the resultant trillions to the US Treasury, we could sustain several years of serious tax cuts….

    There is a third way, and that is, from this point, the Fed more or less “rolls over” on its hoard of QE bonds, buying more bonds to replace those that mature…this would, in effect be permanent money creation…but the Fed would have to signal that is what it plans to do…

  • AK

    I understand what you are saying that FED can print out of thin air. But you have to see the reason they do that. In 2008 crash Congress approved $1T to bailout the banks and then the FED bought all those toxic assets from the banks which were worth zilch! So you see FED came to the rescue because the govt was providing the backing to the banks. Otherwise FED would have never touch any assets owned by the banks.

  • Greg


    Banks can pay what ever they wish on CDs etc. The Fed is not suppressing those rates per se. A bank can charge 12% on a mortgage if it likes….. it just wont find any takers. I can put a price tag of 2 million on my house too, good luck finding a buyer.

    The poor balance sheets of most Americans is what is suppressing rates right now, not Fed policy. Would a bank rather you use their credit card to spend or open a CD account to save?

    The notion that the Fed is suppressing all interest rates artificially is whacky. Do you really think in a Fed less world we would have entities paying 7-8% on bonds, charging 6-7% on mortgages etc?
    What market forces would be driving such activity? Its not like we are on the precipice of a boom here are we? We are teetering on the edge of a canyon.

  • btru

    You are a fucking LIAR.


  • blissex

    Bot the original post and the comments are so far mostly wrong, because “the fed” is actually TWO DISTINCT entities (even if they are related):

    * The Federal Reserve *Board* (and the Federal Open Market Committee) is a federal *commission*, similar to to the FDIC or the FTC, and acting as a payment clearing house is not at all what they do.

    * The Federal Reserve *System* is a set of federally chartered GSE *corporations*, of somewhat unusual legal nature, and they are essentially banking industry cooperatives, and acting as a payment clearing house is one of their main functions.

    The main links between the “Board” and the “System” are two:

    * By law, a certain number of members of the “Board” must be chosen from the pool of presidents of “System” corporations.

    * The Federal Reserve “System” corporation of New York acts as the main banking agent for the Board. This is a convention, historical legacy. In practice, unlike other branches, the New York “System” corporation most important function is to act as agent to the “Board” and its president is far more involved in “Board” (and Treasury) policy than the others.

  • btru
  • btru

    FED IS PRIVATE, create PRIVATE currency, FNR, and CHARGE A FEE, collected thru IRS.


  • btru

    CULLEN is a LIAR,

    FED NOT subject to the Freedom of Information Act


  • Anonymous

    You really need to stop reading the Moneyillusion…… it is full of the lunatic fringe or the naivety of how power works in politics and monetary policy. What if all we needed to do was to print a coin……… what if “Transparency at the Fed” becomes the talking points during our January shutdown?

  • Johnny Evers

    I really don’t think so.
    Consumer rates like CDs and loans are usually based on the Fed’s Prime Interest rate, which was 3.25 last time I looked. It was as high as 9 in the Clinton years and 7.5 before the 08 crash.
    As for mortgages, the Fed is buying mortgages like crazy — rates are low because banks can issue mortgages and them flip them to the Fed, avoiding the long-term risks of holding such low interest deals.
    It’s true that bankers want borrower and not savers; however, I would say the gap between lending rates and savings rates is extremely wide. Credit card interest has not come down as CD rates have.

  • Greg

    Just because they are based on prime doesnt mean they cant charge a lot more above prime if they wish. You are actully making my point for me I think. If the rate was set at zero permanently banks would still have discrestion to pay as much on savings as they wished and charge as much for borrowing as they wished. As they wished simply means “without blaming FED actions for their decision”

    You seem to only lament the low rates for savers and that is only one side of the coin. The Fed has no responsibility to make sure a risk free saving rate beats inflation. Now dont take this to mean I am blind or uncaring to the wishes of those wish not to play the stockmarket and still save. I think there should be a much more generous SS system, not one we are working to dismantle.

  • Johnny Evers

    I’m not really lamenting it. It makes it tough when safe rates are below inflation, though. It makes people takes risks they can’t manage, or else fall behind.
    I think the Fed does have the responsibility of protecting the currency.
    It’s an interesting question as to who establishes rates. The Fed’s announced policy is to keep rates low — so how much impact do they have?

  • Mark A. Sadowski

    What if the fruitcakes who think government shutdowns are seasonal festivals actually came the realization that they are the lunatic fringe.

  • Mark A. Sadowski

    The Freedom of Information Act (FOIA) explicitly applies only to executive branch of the government and to government corporations:


    Thus the FOIA does not apply to the Congress, the Supreme Court, or independent establishments that are not classified as executive agencies.

    Are you also claiming that the Congress and the Supreme Court are private institutions?

  • http://www.fanbrowser.com/ Cowpoke

    Calling someone a Liar makes you look silly.
    Just post some information that adds to the discussion. Here, I will help you out.

    Court Rules Federal Reserve is Privately Owned

    Lewis v. United States, 680 F.2d 1239 (1982)

    John L. Lewis, Plaintiff/Appellant,
    United States of America, Defendant/Appellee.

    No. 80-5905
    United States Court of Appeals, Ninth Circuit.
    Submitted March 2, 1982.
    Decided April 19, 1982.
    As Amended June 24, 1982.

    Plaintiff, who was injured by vehicle owned and operated by a federal reserve bank, brought action alleging jurisdiction under the Federal Tort Claims Act. The United States District Court for the Central District of California, David W. Williams, J., dismissed holding that federal reserve bank was not a federal agency within meaning of Act and that the court therefore lacked subject-matter jurisdiction. Appeal was taken. The Court of Appeals, Poole, Circuit Judge, held that federal reserve banks are not federal instrumentalities for purposes of the Act, but are independent, privately owned and locally controlled corporations.


    1. United States

    There are no sharp criteria for determining whether an entity is a federal agency within meaning of the Federal Tort Claims Act, but critical factor is existence of federal government control over “detailed physical performance” and “day to day operation” of an entity. . . .

    2. United States

    Federal reserve banks are not federal instrumentalities for purposes of a Federal Tort Claims Act, but are independent, privately owned and locally controlled corporations in light of fact that direct supervision and control of each bank is exercised by board of directors, federal reserve banks, though heavily regulated, are locally controlled by their member banks, banks are listed neither as “wholly owned” government corporations nor as “mixed ownership” corporations; federal reserve banks receive no appropriated funds from Congress and the banks are empowered to sue and be sued in their own names. . . .

    3. United States

    Under the Federal Tort Claims Act, federal liability is narrowly based on traditional agency principles and does not necessarily lie when a tortfeasor simply works for an entity, like the Reserve Bank, which performs important activities for the government. . . .

    4. Taxation

    The Reserve Banks are deemed to be federal instrumentalities for purposes of immunity from state taxation.

    5. States Taxation

    Tests for determining whether an entity is federal instrumentality for purposes of protection from state or local action or taxation, is very broad: whether entity performs important governmental function.


    See more here:

    btru, now that wasn’t so hard was it?

  • http://orcamgroup.com Cullen Roche

    Why are you screaming and angry?

  • http://orcamgroup.com Cullen Roche

    btru, you’ve been Sadowski’d. Good luck trying to respond. But I will warn you – there are even more powerful forms of the Sadowski out there so be careful how you navigate this minefield. The odds are not in your favor. Godspeed.

  • Mark A. Sadowski

    You are conflating two very different things.

    Congress approved the use of up to $750 billion by the Treasury to be lent under the Troubled Asset Relief Program (TARP). The amount distributed under TARP was $431 billion:


    Approximately 97% of this has been paid back.

    The Federal Reserve is authorized by Section 13.3 of the Federal Reserve Act to lend to any individual, partnership, or corporation upon any collateral the Fed deems satisfactory under “unusual and exigent circumstances.”


    That’s the Section that allowed the Fed to create the alphabet soup of programs with the acronyms such as CPFF, MMIFF, PDCF, TALF, TSLF, TAF etc. and which the Fed termed “Credit and Liquidity Programs”. Credit and Liquidity Programs are “designed to support the liquidity of financial institutions and foster improved conditions in financial markets.”

    The Fed’s Credit and Liquidity Programs started on December 12, 2007 with the Term Auction Facility (TAF) and the Dollar Swap Lines. The peak stock amount under the Credit and Liquidity Programs was $1,067 billion on December 18th, 2008:


    Approximately $2 billion is still currently lent out through Maiden Lane and TALF.

  • plasticmoney888

    Profits are not assets.

    The FED would pay some 97% of its profit as it does now to the Treasury but the question above was: Who gets the assets?

    Would the assets they created not need to be liquidated and sterilized, causing an economic collapse or would they simply wait until they mature to defer the process?

    Who know they may still hold Gold like some kind of perpetual Bond with no interest that appreciated over the years, if so would they also extinguish that or give the profit to the treasury? If not it not mean that they would sterilize more money than they created to purchase that Gold in the first place? That also tell us something about how emergency currency can become permanent currency.

    The FED is a independent “system” It’s a private company that was originally funded by member banks shareholders that do not have the same power as private companies shareholders as we know them, that’s why the term “system” is more appropriate. If shareholders do not take decisions and their Corporation pays out 97% of their profit it starts to look at least in theory more like a system that was created to benefit its members, the public and the Government. However as Greenspan did mentioned very clearly the FED is an independent agency not governed by congress. http://www.youtube.com/watch?v=-w4AUAdN12c

  • Mark A. Sadowski

    The Federal Tort Claims Act (FTCA) is a 1948 federal statute that permits private parties to sue the United States in a federal court for most torts committed by persons acting on behalf of the United States. The FTCA constitutes a limited waiver of sovereign immunity.

    In this particular case, the court ruled that the Federal Reserve is not subject to tort liability under the FTCA. But it is hardly the only independent establishment of the federal government for which that has been found to be the case.

    In United States v. Orleans, 425 U.S. 807, 96 S.Ct. 1971, 48 L.Ed.2d 390 (1976), the Supreme Court held that Community Action Agencies (CAA) are not subject to tort liability under the FTCA, even though CAA are organized under federal regulations and are heavily funded by the federal government.

    CAA are local organizations that carry out the Community Action Program (CAP), which was founded by the 1964 Economic Opportunity Act to (EOA) fight poverty by empowering the poor as part of the War on Poverty:


    Because CAA day to day operation are not supervised by the federal government, but by local officials, the Supreme Court refused to extend federal tort liability for the negligence of CAA employees.

    Similarly, Pearl v. United States, 230 F.2d 243 (10th Cir. 1956) held that the Civil Air Patrol (CAP) is not subject to tort liability under the FTCA.

    Closely resembling the status of the Federal Reserve, the CAP is a Congressionally chartered organization designed to serve the public welfare as the official civilian auxiliary of the United States Air Force (USAF):


    But because Congress’ control over the CAP is limited and it is not designated as a wholly owned or mixed ownership government corporation under 31 U.S.C. Sub-Sect. 846 and 856, the court concluded that it is an independent establishment of the federal government that is not subject to tort liability under the FTCA.

  • Billiejones

    As far as the mechanics of QE……should any consideration be paid to the PRICE that the Fed is paying for Treasuries and MBS. To my laymans eye it seems they are buying without any regard for value (admittedly not the purpose of their LSAP). Given that the Fed now owns 1/3rd of the stock of 10 yr treasuries….when they sell, how could they possibly hope to recapture the high prices they paid? As an illustrative point…I follow the MBS market a bit and there is common complaint in Agency MBS that the Fed’s purchases are pricing out private investment that cant justify the un-economic low yields the Fed is willing to bid up to.

    Presumably, the Fed would begin to unwind its purchases once it felt the economy was on stable ground……a stable/growing economy is generally accompanied by rising rates. How does the Fed recapture its initial capital outlay when rates are say 5% and the Fed was bidding itself up at 2%? There is a capital gains loss in that scenario….I suppose it could be argued that interest payments help offset but after the IOR the fed is paying banks (only 0.25% i know)….the NET is not favorable to the Fed i would think.

    Assuming this is correct and that the FED DOES sell before maturity…..would the net loss they took be considered “true money printing” Ie: that loss is permanently transferred to the Banks that the Fed bought from.

    I realize the alternative is that the Fed allows the bonds to mature, but wouldn’t this strategy be akin to Benjamin Cole’s point……effectively permanent money creation since presumably The Fed would be incentivized to just roll permanently.

    Any corrections or input greatly appreciated

  • plasticmoney888

    For those suspicious mind, If you want to participate in the FED profits buy shares of publicly listed Banks that own shares of the FED. This way when you have a conspiracy or paranoia attach you can relax and tell yourself you do have part of that 6% div.

  • Edward

    you should see the insults you are getting from the loonies in the Business Insider comment section (apparently you are a Nazi). Why anyone would write for that trash heap of a site, I don’t know.


  • http://orcamgroup.com Cullen Roche

    Seeking Alpha and Business Insider take my articles per old agreements I have with them. I don’t even look at the comments because you pretty much always know what you’re going to get. Oh well. The exposure hopefully gets the message out to a few people. But I am not really that hopeful. I don’t think people want to know how the system actually works. I think they actually want to believe these conspiracy theories for whatever reason.

    Let them buy their guns, gold and bunkers. If Eugene Fama is right, the efficient market (the same free market these people love) will surely part them from their assets over time.

  • midas2

    Much of this apparent confusion is due to different understandings of “ownership”. Only consider the question of “who owns your children?”. You cannot sell them, and you do not control the minimum amount of education they get. You may not be allowed an undetermined amount of physical harm (spanking). But it is very hard to take them away from you, they are yours. Of course you are responsible for them for their existence and security. The Fed has a limit on its actions, the congress can modify its behavior if they wish. Maybe another term than owning is needed. Perhaps ‘responsibility’.

  • http://orcamgroup.com Cullen Roche

    Right. The Fed issues shares of stock that represent direct ownership. But they don’t issue shares for 100% of the Fed. Ie, no one technically owns 100% of the Fed. The Tsy gets most of the profits, but the Tsy doesn’t technically own the Fed. So it’s easy to see how people confuse the outstanding stock for pure ownership. It gives Austrians and fear mongers a good deal of leverage when trying to argue that the Fed is owned by the banks because, technically, the banks are the only entities with actual ownership claims on the Fed. That’s a highly misleading view, but one that can be crafted into a fairly convincing argument if you were so inclined.

  • LVG

    The math is pretty simple here Cullen. Your example shows who really owns the Fed. And it’s the same idiots who always complain about the Fed being owned by the banks. Anyone who thinks 1.5B out of 90B = ownership is a complete moron. The Fed sends almost all profits to the US Treasury and US taxpayer.

    End of story. You have to be an idiot to not understand how simple this is.

  • http://orcamgroup.com Cullen Roche

    Yeah, the biggest irony is that the Fed Act stipulates that the profits must be remitted to the US Tsy to pay down the debt OR buy gold. Which is something that gold bugs and Fed conspiracy theorists should love. Of course, they don’t understand this so they hate what they don’t understand.

  • btru

    Cullen, little ignorant and propaganda agent, I haven’t been “Whateverd” you think.
    Little ado, you got all excited only because one dude come over to your rescue… how old are you? When it’s not the gov to save you from drowning you call another agent in charge.
    Dude, grow up. Be a man, be liable.

    First the FED is a private bank. All Central bank are private banks. From itself.
    “The Federal Reserve Banks, however, consider themselves private corporations with private funding. ”

    Do a search, pretty much all you mentioned is. Check Edgar search engine, you’ll be surprised to find many company that you call “state of”.

    Don’t know what the IMF is really for?
    Don’t know what the BIS is really for?
    May I invite you to do a little search regarding the US bankruptcy of 1933… Never heard of?
    Ever wonder why you do pay to a Receiver?
    Bretton Woods?
    Can you tell me more on Promissory Note? Loan?
    Better, lets go back to the heart – Explain money. From day -1. From Barter… Deconstruct what’s going on… find what’s ‘Required’ for money.
    Then you may understand, should I say overstand, what the actual system is. Fraud.

    Until you and swarosky can come with clean answers, and I know them, keep reading and keep spreading your lie.

    But do you really think the FED would hire you if you’re not even capable of knowing what the institution is? It looks like you worshiping the god FED.

    God himself, wouldn’t side you. Read again, Bible, Torah, Quran… then will be even for discussion.

    If you need more reading advices before we could go any further, let me know.

  • btru
  • btru

    I have problem with lies. But I’m super calm actually. Only you to think that cap is yelling… you follow too many rules.
    When you need only to behave.

    Truth exist, The rest is a make-up.

  • Greg

    Seems to me the safe rate HAS to be below inflation……. or else it will be inflationary!

    Think about how much income would be added to the economy right now if rates were 6 or 7%. Now, one could argue that that would in fact be good, and I think there is SOME credibility to that line of thinking but how many people think its good for people who arent working and producing any more to have steadily growing safe/guaranteed income

  • Johnny Evers
  • http://www.orcamgroup.com Cullen Roche

    Well, you’re calling people names and acting erratic. Why? Are Fed conspiracy theorists incapable of rational discussions? You keep saying the Fed is a private bank. Okay. Then why does it turn over 95% of its profits to the government??? It’s just wrong to claim that this private entity generates so much profit for a public entity. But don’t let the facts get in the way of a good conspiracy theory…

  • BillieJones


    As you know, i tend to side with moderation and tolerance of opposing views….however, i must say that I can understand how dealing with guys/girls like BTRU would leave a sour taste in your mouth. I don’t know if english is a second language to BTRU, but its almost impossible to follow his thought prices…he has difficulty formulating coherent sentences.

  • Mark A. Sadowski

    “All Central bank are private banks.”

    Even the Central Bank of the Democratic People’s Republic of Korea?!?



  • BillieJones


  • John

    “Are Fed conspiracy theorists incapable of rational discussions?”

    Yes. You have to understand that fear is what drives conservatives, and anti-government types like btru are classic examples of that type of conservative. You cannot have rational discourse with someone who is psychologically inclined to believe no one can be trusted and has difficulty dealing with complexity.

  • paul

    Yes wonder who owns a small store when the mafia collects it’s weekly money?

  • http://www.orcamgroup.com Cullen Roche

    So, the banking system held us hostage, forced us to elect people to enact the Fed Act and operates like the mafia? Do you really believe that???

  • Benjamin Cole


    Interesting points…and you are right, more important than Fed losses or gains is a robust economy….

    I wonder if the Fed is behind low yields…the globe has low yields and trending lower…many (including Bernanke) attribute this to a global savings glut….that’s my opinion too…supply and demand…

    Unless the Fed gets very, very aggressive in its Qe (and perhaps cost interest paid to banks on excess reserves) I suspect we will see “low yields” for a long, long time…think Japan….

    I argue that the Fed has for years created “artificially high” yields through sustained tight money policies, and that long-term policy is bearing fruit in the form of perma-ZLB-slow growthism….

    You don’t get low yields if investors fear inflation…and they obviously don’t….

  • Joe in Accounting

    That book you quote regarding Jekyll island is complete and utter bullsh!t. You’re an IT guy that can read, so use your IT skills to click on this “hyperlink” and read the content of this “world wide web” page.


  • Mark A. Sadowski

    “…when in 1964 Richard Nixon did just that,…”

    Nixon was president in 1964?

    (The things you learn from well read IT guys.)

  • Frederick

    It’s amazing to me that so many people believe these conspiracy theories about the Fed. It’s like they don’t do any of their own research.

  • Greg

    Exactly part of my point. By keeping the 3 month rate above inflation most of the time it makes fighting inflation that much harder for the Fed to do.

    Which is why a permanent near zero rate might be a better inflation fighting tool.

    Im not a huge inflation phobe to be honest. 1) I dont think we define inflation very well and 2) I dont think we measure inflation very well. All the measurements seem biased towards keeping wages down. Rising wages are what gets the Feds fire hoses primed more than anything else. Hence all this union busting nonsense and other labor cuts we’ve had the last 5-6 years

  • Gloeschi

    Thanks for picking up this subject, Cullen, even at the risk of inviting the usual screamers.
    Any idea why the Fed runs two different websites (.gov and .org)? Also, why doesn’t the Fed simply publish who owns it?

  • btru

    I’m not your mother, and I assume you are grown enough to do your own research.
    I gave ‘key words’,
    Address all of them and then come back with appraisal.

    Can’t waste time to educate you, I spend my time reading not to have to sacome up with cullen’s BS.

  • btru

    And socialism drives death.
    The only known Genocides are Democide.

    Bank is fraud like it or not.
    And if one is part of the system, is part of the fraud and take the risk to be charged for fraud.

    Not my problem.


  • btru

    Nothing to do with believing, or faith.

    Quick example :
    Go to the bank,
    Get a ‘loan’ where only you take the obligation to pay, Legally the signed piece of paper is a promissory note.
    Hand over your piece of paper,
    Banker gives you another piece of paper, with same amount, and it happens that legally it is a promissory note.

    So one gives a promissory note, the other one gives another promissory note,

    I don’t call that LOAN. EXCHANGE at best.

    You did create the ‘money’ thru your signature.

    Think about it,
    A bank loan money and it’s an asset.

    That should keep you busy for a moment.

    Don’t waste time on me, SEARCH.

  • CMA

    Great article, Cullen. Very informative

  • http://orcamgroup.com Cullen Roche

    You don’t seem to understand why a loan is a loan. Loans exist because you don’t have the current income to afford what you want. People could buy most things without going into debt. But they choose to buy more than their current income can afford. They need the Iphones, the Mac computers, the McMansion, the fancy cars and all the other crap that isn’t really necessary, but desirable. That’s why debt exists. It’s a very simple premise. Debt allows you to spend more than your current income and pull your future spending into the present. Banks give you access to this ability by charging you interest.

    Now ask yourself – who is really the greedy one in this agreement? The guy spending more than his current income to buy a McMansion? Or the bank giving you access to a loan with interest?

  • SS

    Cullen, most people just think debt is bad because they don’t understand what it really is. They act like a bank forced them into debt as if they had no control over it. Guys like BTRU want the McMansion and think they don’t have to earn it. Ignore this fool.

  • Suvy

    I don’t know who owns it, but a Marxist is gonna run it.

  • http://orcamgroup.com Cullen Roche

    MOst people don’t think of debt as being two sided. They just think debt is something that strangles the debtor without realizing that the debtor is usually benefiting from using the debt in the first place….

  • Suvy

    When was the last time Congress passed anything responsible without a manufactured crisis? I can’t think of anything in my memory, but that’s probably because I’m young. However, it has been a while though.

  • Mark A. Sadowski

    Let’s turn that question on it’s head.

    When was the last time Congress passed anything responsible due to a manufactured crisis?

    Let’s see, I have that list of such events right here, and the answer is…um…never.

    Only a closeted anarchist could think government shutdowns would lead to better government.

  • Geoff

    Haven’t you guys heard that we’re all debt slaves?

  • John

    Completely incoherent response. I seriously wonder about the psychological stability of people like you.

  • DanH

    This is how gold bugs are. They’re borderline insane.

  • Suvy

    The last welfare reform bill in 1994 was passed after a government shutdown. A lot of bills in the 70s and 80s were done in a similar fashion. On the other hand, you get bills like the ACA(see the disaster it has become and it’s only gonna get worse), the authorization of the Iraq War, the Bush tax cuts, etc when things get rushed through Congress. Congress is much more responsible with a gun to its head. I’m sure you’d be a lot more careful if you had a gun held to your head and I certainly know I would.

  • Not an Economist


    Most of the time, doctors get it right when they prescribe medication for their patients…might I suggest you start taking yours again?



  • http://orcamgroup.com Cullen Roche

    It’s better not to use medicine. The body, much like the “free markets”, will naturally heal itself at all times. FYI.

  • Explorer

    So the Treasury issues bonds to the dealers who are mainly(?) banks and the Fed buys them from the banks, and the Fed gets the interest from the Treasury and the Fed pays it’s profits (which includes the interest received on the bonds) to the Treasury? (Of course there is a small leakage to the banks as they will want to clip the ticket on the bonds they buy and sell, but given the volume even a pip or tow would be enough!)

    Is that called monetising the debt?

  • JK


    Yeah… all Treasuries issued that end up on the Fed’s balance sheet have been “monetized” … but…

    1) they can, and will, also be un-monetized. remember: Treasuries are just another kind of interest-bearing financial asset. when the economy picks up and the Fed is ready to raise the Federal Funds Rate, it will un-monetize debt by selling Treasuries in removing Reserves from the banking system (Reserves that the Fed created out of thin air to “monetize” that debt earlier).

    2) what’s the big deal?

    p.s. I wonder how useful the word “monetize” really is. It’s conotation is much more powerful than it’s actual effect.

  • http://make300aday.com Steve

    It’s a complicated question, and a complicated institution.

    The structure and clearinghouse functions are obviously public mechanisms, but I think where people get really testy is when it comes to who owns / controls the power of the policy-making arm. The financial / banking industry as a whole is managed by (as a result of its very nature) an incestuous pool of like-minded, in-the-box-thinking narcissists.

    The public owns the engine of the car, but Goldman Sachs and Co get to drive it and pick up all the chicks.

  • Mark A. Sadowski

    Welfare Reform is the disaster. since 1996, the number of families with children living in extreme poverty — that is, on $2 a day or less — has gone up nearly 130 percent.


  • Johnny Evers

    That’s a commentary on the breakdown of the two-parent family, especially in the black community.

  • Mark A. Sadowski


    There’s been almost no change in the percentage of children living with married parents since Welfare Reform.

    In 1996 68.0% of children lived with married parents. In 2011 this had only fallen to 65.0%.In 1996 33.0% of black children lived with married parents. In 2011 this was still 33.0%.


    But since Welfare Reform the number of families with children living in extreme poverty is up by 130%.

  • Dunce Cap Aficionado

    I don’t follow that at all, to be honest. Sorry.

    And I also cannot tell if you are speaking in generalities or not.

    I have no qualms with the Fed, nor do I think anything about it is malicious or conspiracy driven.

    That being said I see where I messed up my understanding of the divs. They’re from Regional Fed banks to member banks. Duh.

  • Suvy

    I agree with you. If banks are being bailed out, they are utilities and they should be treated as such.

  • AK

    I don’t think so. The reason the FED can print money out of thin air is because of the US taxpayers backs it up. The ability of the US taxpayer to pay taxes is backing the new money.

    Similarly, the minute a homebuyer signs on the dotted line for a debt an equivalent asset is created. This promise of the home buyer to pay back the loan with his future income is the basis for this new money creation.

    Otherwise, if it was so simple why don’t every country just print their money and run the economy. No one would accept dollars unless they are backed by US taxpayers.

    FED needs to realize that. If the US taxpayer has no faith in the govt then FED or the U.S. Treasury are powerless.

    Second, if the FED is about saving the banks first then the FED should admit that in public. Why do they pretend to be concerned about the jobs or inflation? (Check out Janet Yellen speech: http://www.youtube.com/watch?v=U_SuKa3xlCg )

    FED can only increase liquidity by purchasing toxic assets and/or tamper with interest-rates relative to natural interest rates. This disrupts the real economy and creates an artificial economy for financial-assets trading and speculations.

    I am an engineer and work with lot of engineers. Most of them don’t think about creating new products anymore. What they think about is what home to buy, what stock to buy or sell and so on. No more real economy.

  • http://n/a SwissPete

    Excuse me, but $1.6B in dividends is a whole lot of money. If not to you, nor the bank, to me it is. My question is why should they get any dividends and make any money from this supposedly extremely beneficial entity to them and our economy? Why should they be owned by private entities? That’s why I don’t like the Fed, as far as I can see, it’s legal corruption.

  • http://orcamgroup.com Cullen Roche

    Yes, 1.6B is a lot of money. But the point I was making is that 1.6B out of 90B does not constitute any reasonable measure of “ownership”.

    The reason why banks get stock (in fact, are required to get stock) is because they pay in capital to the system. The thinking there is to keep the Fed privately capitalized. Remember, stock is issued when capital is paid in. It’s not like the banks got a stock certificate for nothing. It’s sort of like FDIC insurance. The banks fund the system so the taxpayer doesn’t have to. Ironically, if the banks didn’t pay in capital when they joined the FRS then the Fed might require taxpayer injections on occasion. And then the same people who complain about pvt Fed “ownership” would wine about Fed bailouts.

    Austrian economists are fantastically confused on this stuff. You shouldn’t listen to anything they say about the Fed.

  • rfr

    Perhaps, before arguing whether the Fed is a private entity or not, you should have defined the term “private entity”.

  • http://orcamgroup.com Cullen Roche

    I never asked whether the Fed was private? I asked who owns it. The answer is obvious – it’s ownership is multifaceted. That’s why I called it a public/private hybrid entity.

    Anyone who says the Fed is owned by the banks is just flat out lying to your face. How else could anyone understand what corporate stock is, see how this stock has no voting votes and a claim to a very small portion of profits, and still call that pure ownership, is beyond me. These people are just misconstruing the facts to further their own political agenda.

    I don’t know how Austrian economics is even still around. Who buys into this crap?

  • Geoff

    I like Cullen’s point that almost all Fed profits are remitted back to the Treasury. So if I had to say that anyone owns the Fed (which I don’t), I’d say it was the Govt.

  • http://n/a SwissPete

    Interesting. Do you know how much capital they had to inject back then? Also, the ownership question is important too because “owners” get a say..do you know how much banks can “influence” the Fed?

  • http://orcamgroup.com Cullen Roche

    I actually don’t know what the capital requirements are specifically. I just know they’re required by law to buy the stock. The law probably made a lot more sense back 1935 when it was enacted than it does today….I’d be fine eliminating it. But then we have to realize that if the Fed ever operates at negative equity and says it can’t operate any longer (which would be unnecessary, but politically relevant) then you and I are going to foot the bill. :-)

  • Suvy

    Well yea, but that’s due to other factors. We’re in the worst recession since the 30s, which is why more people live in poverty today than in 1996, when the economy was booming.

  • http://brown-blog-5.blogspot.com/ Tom Brown

    O/T: I can’t recall now, but there’s always a lot of discussion here about CBs setting interest rates. Nick Rowe addresses that here: