The Fed

The US Federal Reserve System, what it is:

The Federal Reserve System (also the Federal Reserve; informally The Fed) is the central banking system of the United States. The Federal Reserve System is a quasi-governmental banking system composed of (1) a presidentially-appointed Board of Governors of the Federal Reserve System in Washington, D.C.; (2) the Federal Open Market Committee; (3) twelve regional Federal Reserve Banks located in major cities throughout the nation; and (4) numerous private member banks, which own varying amounts of stock in the regional Federal Reserve Banks. Ben Bernanke serves as the current Chairman of the Board of Governors of the Federal Reserve System.

Legal status and position in government: The various components of the Federal Reserve System have differing legal statuses. The Board of Governors of the Federal Reserve System is an independent government agency. The Board is subject to laws like the Freedom of Information Act and the Privacy Act which cover Federal agencies and not private entities. Like most other independent agencies, its decisions do not have to be ratified by the President or anyone else in the executive or legislative branches of government.

The Board of Governors does not receive funding from Congress, and the terms of the members of the Board span multiple presidential and congressional terms. Once a member of the Board of Governors is appointed by the president, he or she is relatively independent (although the law provides for the possibility of removal by the President “for cause” under 12 U.S.C. 242). The Federal Reserve Banks are nominally “owned” by the private member banks (see below). In Lewis v. United States, 680 F.2d 1239 (9th Cir. 1982), the United States Court of Appeals for the Ninth Circuit stated that the “the Reserve Banks are not federal instrumentalities for purposes of the FTCA [the Federal Tort Claims Act], but are independent, privately owned and locally controlled corporations.” The opinion also stated that “the Reserve Banks have properly been held to be federal instrumentalities for some purposes” [See remark 1]. The member banks are generally privately-owned corporations. The stocks of many of the member banks are publicly traded. The Federal Reserve System was created via the Federal Reserve Act of December 23rd, 1913. All national banks were required to join the system and other banks could join. The Reserve Banks opened for business on November 16th, 1914. Federal Reserve Notes were created as part of the legislation, to provide an elastic supply of currency. The notes were to be issued to the Reserve Banks for subsequent transmittal to banking institutions. (Read more on wikipedia).

Read: Dirty Secrets of the Temple (a critical look of how the Fed works), June 29, 2006, by Stephen Lendman, on his blog. Or this short excerpts of the 9 page text.

Some of hundreds today’s articles about:

Fed can’t let inflation build up steam: Fisher, August 29, 2006.

Brown urges restraint on public sector pay, August 29, 2006.

(Chairman Ben Salomon) Bernanke Can Aid Economy by Taking a “Breather”, August 29, 2006.

Fisher vows Fed to stay ahead of inflation curve, August 29, 2006.

Fed Minutes Show Fears of Slowing Economy, August 29, 2006.

DJ FOMC Minutes: Most Saw Core Inflation Declining ‘Gradually’, August 29, 2006.

Dollar extends losses after Fed meeting minutes, August 29, 2006.

Other recent articles:

Summer’s dog days bring cloudy skies over central banks, August 28, 2006.

Fed, Still Harboring Inflation Concerns, May Wait to Raise Rate, August 28, 2006.

Westward Ho for Bernanke & Co. – Central bankers ponder the effects of globalization at the Jackson Hole confab. The central question: Is the Fed getting it right? August 28, 2006.

Did the Fed overreact to inflation risk? August 27, 2006;

Current U.S. Federal Reserve Policy Could Accelerate Inflation”, August 7, 2006.

(For more, put ‘The Fed World Economy’ into Google and click on ‘web’, and ‘news’).

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