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Or, in other words: Who does the head of Fed report to? Is the Federal Reserve a private institution?

I'm going to be a bit naive here, have just read about how the Fed has been brought to life and can hardly believe that it did manage to survive for almost a century (!)

I have already checked many sources but cannot get a definite answer, so would appreciate if some people, maybe American, could expand on the topic.

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    Every country has a central bank. (Well, maybe not every, but literally 99% of all countries, and every major one). There's nothing special about the Fed. I recommend a course in Keynesian macroeconomics :)
    – Matthew Read
    Commented Jan 7, 2011 at 18:33
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    It's not the fact that it's central that bothers me, rather the fact that this is a profit-driven institution, isn't it? Also it has a very bizarre foundations.
    – matcheek
    Commented Jan 7, 2011 at 19:44
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    "Who does the Fed report to?" That's a very good question indeed.
    – mbhunter
    Commented Jan 8, 2011 at 7:21
  • Completely opposite to Matthew Read's comment, I recommend a course in Austrian economics. It will expose the Fed for what it is: a bunch of large banks that exist for the benefit of a bunch of large banks.
    – mbhunter
    Commented Jan 8, 2011 at 7:22
  • If the OP "can hardly believe that it did manage to survive for almost a century" check out how monetary policy worked in the US for the century before the Fed. For example, you don't see political parties named for monetary policy anymore (Greenback, Free Silver, etc). en.wikipedia.org/wiki/Greenback_Party
    – user662852
    Commented Aug 2, 2017 at 2:59

4 Answers 4

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The Fed board members are appointed by the US President and approved by the Senate. That is the only control the US government has over the Fed. Otherwise it is a private, unaudited bank that has the unique ability to print money.

The Fed was created in secret (or for a shorter article) on Jekyll Island by a bunch of bankers who disguised their identities so no one would know what they were meeting about. That seems like a great way to start a central bank.

The Fed was created by bankers for bankers. The citizens of the US were not clamoring for a central bank. The bankers were the ones who desired a central bank since all fractional reserve banks are always teetering on the verge of bankruptcy.

List of participants at the meeting on Jekyll Island:

  • Senator Nelson W. Aldrich, Rockefeller in-law
  • Henry P.Davison, Morgan partner (banker)
  • Paul M.Warburg, Kuhn, Loeb & Co. partner (banker)
  • Frank A. Vanderlip, vice-president of Rockefeller's National City Bank (banker)
  • Charles D. Norton, president of Morgan's First National Bank of New York (banker)
  • A. Piatt Andrew, Harvard economist and staff assistant to Aldrich on the Monetary Commission.
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  • in light of these facts why do American people tolerate such an institution? In my simple mind, it seems to me that they are being ripped off. Their government could take care of regulating financial market by itself without borrowing money from a profit-driven institution, couldn't it?
    – matcheek
    Commented Jan 7, 2011 at 19:40
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    How many people do you know who care about banking? When the Fed was created it was sold to the people as being this great institution that would alleviate banking crisis and smooth out boom/busts in the economy. The people weren't told the truth about it actually being a way to cartelize banking. The people will not care until it is too late. That is the history of central banking. Look at this website. Most people on this website think I'm crazy for buying gold. They have complete faith in fiat currency when history shows a very poor record track record for them. It's bizzaro world.
    – Muro
    Commented Jan 7, 2011 at 20:48
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    @Muro I often take opposite sides of issues from you, but my disagreement doesn't mean that I think you are crazy. Buying gold or any commodity is an investment, and as with all investments, you should buy low and sell high.
    – duffbeer703
    Commented Jan 8, 2011 at 2:26
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    The only reason I think you're crazy, Muro, is because you think Gold isn't a fiat currency. All currency is fiat ;)
    – Benjamin Chambers
    Commented Jan 8, 2011 at 19:29
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    This isn't the right place for a discussion, so I'll just link to the points I make elsewhere: money.stackexchange.com/questions/1767/why-does-gold-have-value/…
    – Benjamin Chambers
    Commented Jan 8, 2011 at 23:46
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It has both public and private entities. Calling it a 'private institution' is a little naive, but has some validity.

http://en.wikipedia.org/wiki/Federal_Reserve_Act

You can read the easy stuff about it on wikipedia, but the official legislative act that created it will give you better info: http://www.law.cornell.edu/uscode/12/usc_sup_01_12_10_3.html

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It's a central bank with public and private aspects.

  • It consists of US Government and member bank appointed board members.
  • It operates without the need for direct ratification of decisions by the Congress or Executive, but is subject to Congressional regulation.
  • It is a for-profit institution, but all profits in excess of the dividend to member banks are paid to the US Treasury.

It has attributes that are unique compared to central banks like the Bank of England or Bank of Canada. But the US has always had an unusual financial system, traditionally driven by lots of small banks, which were mostly state-regulated for most of US history.

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The Federal Reserve is not Federal and it is not a reserve. It is independent of our government. If you want a very good inside look of the Federal Reserve, purchase a book titled The Creature from Jekyll Island.

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