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FEDRES3.TXT
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1994-02-01
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MORE ON THE FED RESERVE FRAUD.....
I recently decided to ask the FED itself, about it's private ownership.
After a couple of tries I got to the legal division of the Board of
Governors. I told them that I was looking for something in "clear"
language that speaks to the fact that the Federal Reserve Banks are
privately owned. What follows is their reply. It came on one legal size
sheet with Federal Reserve letterhead. There is a seal of The Board of
Governors which looks very much like, but is not identical to the seal
of the United States in the upper left corner. I have typed the letter
word for word except for a numbered notation that I place at the end of
a sentence that I have a question about. The notations look like this:
<<1>> ... <<n>>. After the Federal Reserve's letter I pose several
questions relating to the notated statements.
I have always found it interesting that 9 out of 10 people believe the
Federal Reserve Banks are part of the federal government (most often the
U.S. Treasury), and that the idea that the Banks are privately owned is
incredible to almost everyone. Although, it is not stated directly, the
letter indicates private ownership. It also seems to say, again not
directly, that the Federal Reserve Banks "owners" do not make a profit.
What do you think?
________________________________________________________________
QUOTE:
Board of Governors
of the
FEDERAL RESERVE SYSTEM
Washington, D.C. 20551
THE FEDERAL RESERVE SYSTEM
The Federal Reserve is the Nations central bank. It was created
by an Act of Congress on December 23, 1913. The Federal Reserve System
consists of a seven-member Board of Governors (an independent agency of
the federal government with headquarters in Washington, D.C.), plus a
nationwide network of 12 Federal Reserve Banks and 25 Reserve Bank
branches.
<<1>> The Federal Reserve Banks were established by congress as an
operating arm of the nation's central banking system, and they have both
public and private elements.
The Federal Reserve Banks were established by Congress for a
public purpose. In addition to providing a variety of financial
services to the U.S. Treasury, financial institutions and the public,
the Reserve Banks act as vital sources of information about the economy
and financial development in all parts of the nation. Key to this
activity is the Bank's Board of Directors which is made up of nine
private citizens who come from many walks of life and add their
experience and expertise to efficient operations of the Reserve Banks.
Six of these Directors are elected to their posts by the member
commercial banks who, under law, must subscribe to stock in their
regional Federal Reserve Bank. Member commercial banks include all
national banks and those state banks who chose to become members.
Ownership to Reserve Bank stock is in the nature of an obligation that
goes along with membership and does not carry with it any
characteristics of control or financial interest normally attached to
stock in a corporation.
<<2>> The amount of stock that member banks are required to purchase is
specified by law. The stock may not be sold or pledged as collateral
for loans, and dividends are limited by law to 6 percent per year.
<<3>> If a Reserve Bank were liquidated, any funds remaining after the
payment of bills would revert to the U.S. Treasury.
Neither the Board nor the Reserve Banks receive appropriations
from Congress. Therefore, they do not operate with tax revenues but
rather pay expenses out of earnings. Earnings of the Federal Reserve
Banks are derived primarily from interest received on their holdings of
U.S. Government securities and on the fees they charge depository
institutions for providing services such as the processing and clearing
of checks. <<4>> After payment of expenses, contributions to surplus,
and payment of other assessments, all the net earnings of the Federal
Reserve Banks are aggregated and paid over to the U.S. Treasury. In
1992, for example, the Federal Reserve paid $16.8 billion to the U.S.
Treasury. <<5>>
The financial accounts of the Board of Governors are audited
each year by an independent firm of certified public accountants. In
addition, Congress has authorized the U.S. General Accounting Office to
conduct audits of the Federal Reserve. Also, each Reserve Bank has a
General Auditor who reports to the Bank's Board of Directors regarding
audit activities, and the Board of Governors, in exercising supervision
of the Reserve Banks, conducts an annual examination of each Bank. <<6>>
The U.S. Congress has ultimate authority over the Federal
Reserve and oversees the activities of the Federal Reserve through
appropriate committees. The Board of Governors is required by law to
report to Congress annually on the Federal Reserve's activities. With
respect to monetary policy, the Federal Reserve is required by statute
to report to Congress twice a year on its plans and objectives. Members
of the Board, particularly the Chairman, are frequently requested by
Congressional Committees to testify on financial and economic issues.
######
END QUOTE:
Below are several questions I have as to how to interpret this letter.
Any light you can shed on these or any other questions you may see will
be greatly appreciated.
<<1>>
The Federal Reserve System consists of a seven-member Board of Governors
(an independent agency of the federal government with headquarters in
Washington, D.C.), plus a nationwide network of 12 Federal Reserve Banks
and 25 Reserve Bank branches.
Questions:
a) How are the Board of Governors selected?
b) How long are their terms?
c) Legally speaking what is "an independent agency of the federal
government"?
<<2>>
Ownership to Reserve Bank stock is in the nature of an obligation that
goes along with membership and does not carry with it any
characteristics of control or financial interest normally attached to
stock in a corporation.
Questions:
a) This sounds like a very "unprofitable" type of stock. Is there some other
means by which title 12 allows the Federal Reserve Bank owners to profit?
b) What is meant by "Ownership to Reserve Bank stock is in the nature of an
obligation..."?
<<3>>
The amount of stock that member banks are required to purchase is
specified by law. The stock may not be sold or pledged as collateral
for loans, and dividends are limited by law to 6 percent per year.
Questions:
a) How much stock must a member bank purchase?
b) If the stock cannot be sold, what then, of Bo Gritz's claim that all the
Federal Reserve stock could be purchased back by the U.S. Treasury for
the original purchase price?
c) How much does the 6 percent per year amount to?
<<4>>
Earnings of the Federal Reserve Banks are derived primarily from
interest received on their holdings of U.S. Government securities and on
the fees they charge depository institutions for providing services such
as the processing and clearing of checks.
Questions:
a) Are Federal Reserve Notes considered "U.S. Government securities"?
b) What secondary sources of revenue are there?
<<5>>
After payment of expenses, contributions to surplus, and payment of
other assessments, all the net earnings of the Federal Reserve Banks are
aggregated and paid over to the U.S. Treasury. In 1992, for example,
the Federal Reserve paid $16.8 billion to the U.S. Treasury.
Questions:
a) What are "contributions to surplus"?
b) What "other assessments"? Is this apart from expenses?
c) Considering that the interest on the national debt is several hundred
billion
dollars, isn't $16.8 billion a small amount to be left over after
expenses,
etc..etc?
<<6>>
The financial accounts of the Board of Governors are audited each year
by an independent firm of certified public accountants. In addition,
Congress has authorized the U.S. General Accounting Office to conduct
audits of the Federal Reserve. Also, each Reserve Bank has a General
Auditor who reports to the Bank's Board of Directors regarding audit
activities, and the Board of Governors, in exercising supervision of the
Reserve Banks, conducts an annual examination of each Bank.
Questions:
a) I have heard several times in various news groups that the Federal
Reserve Banks do not have to stand audit. This paragraph seems to
soundly controvert that idea. I was under the impression that Gonzales's
bills, currently before Congress, call for a power of audit over the
Federal Reserve System.
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