CHAPTER VI

WHO OWNS THE FEDERAL RESERVE BANKS?

108. Why do some people believe that the private banks “own” the Federal Reserve System?
Because the original act required that member banks invest a sum equal to 6 percent, of their capital in the stock of their regional Federal Reserve bank.

109. Was this required to disseminate Federal Reserve ownership?
No. This “stock” requirement was actually a safeguard against misuse of the Government credit that was being delegated to the banks. Because private banks, and the regional Federal Reserve banks they controlled, might pass on loans that were doubtful, the probity of Federal Reserve notes (and Treasury balances kept on deposit at the Federal Reserve banks) might be endangered. Forcing member banks to “invest” some of their capital in the Federal Reserve was a guarantee against loose practices.

110. What exactly is the “stock” owned by the banks?
It is not “stock” in the normal, corporate-investment sense of the word; it carries no Proprietary interest; it cannot be sold or pledged; it represents no claim on Federal Reserve assets, and carries no voting rights. It is not ownership stock at all.

111. Could the Federal Reserve operate without this “stock”?
Yes. Today, it serves no worthwhile purpose whatever. Eliminating the stock would change nothing in the basic structure and functions of the Federal Reserve. The Federal Reserve does not need the money. It can write its own check whenever it needs money.