Debunking the Federal Reserve
Conspiracy Theories (and other financial myths)

Myth #5. The Federal Reserve is owned and controlled by foreigners.

The Federal Reserve System is the primary regulatory agency governing the U.S. banking industry.  It has singular importance in setting monetary policy and many economists believe it has substantial influence on the course of the business cycle.  Yet, could it be that the most important economic institution in the United States is actually owned by foreigners?  Gary Kah (1991) and Eustace Mullins (1983) authored separate books alleging that a secretive international banking elite owns and controls the Fed.  Furthermore, his shadowy group uses its power to manipulate financial markets and to control the U.S. economy.

The focus of both books is the Federal Reserve Bank of New York.  What we typically call the ‘Fed’ is actually a two level system: 12 regional Federal Reserve Banks (the New York Fed is one of them) and the Board of Governors that runs them (Alan Greenspan is the Board’s chair).  Gary Kah claimed foreigners directly own the New York Fed, the largest and most important of the dozen regional institutions.  Through it the international collaborators control the entire Federal Reserve System and reap its gigantic profits.  Eustace Mullins agreed on the importance of the New York Fed, but instead claimed it is owned indirectly by foreigners – through a European banking club he termed the “London Connection” which controls the Fed’s policies from abroad.

Are any of allegations true?  In this article I focus on whether foreigners own the Federal Reserve Bank of New York either directly or indirectly, whether it controls the enitre of the Federal Reserve System, and whether foreigners receive the Fed’s large annual profits.

Who Owns the New York Federal Reserve?

Each of the twelve Federal Reserve Banks is organized as a corporation in much the same way as many other firms.  According to Kah, foreigners own a controlling interest in the shares of the New York Fed.  He claimed that “Swiss and Saudi Arabian contacts” identified the top eight shareholders as

He also described these groups as the bank’s “Class A shareholders” (p. 14).  This is curious because Federal Reserve stock is not classified in this manner.  It can be either “member stock” or “public stock,” but there are no such things as ‘Class A’ shares.  However, the directors of a Federal Reserve Bank are separated into classes A, B, and C depending on how they are appointed (12 USCA §302). This may have been the source of Kah’s confusion.

Eustace Mullins compiled a very different list.  He reported that the top 8 stockholders of the New York Fed were

According to Mullins these institutions in 1983 owned a combined 63% of the New York Fed’s stock.  These American banks, in turn, were owned by European financial institutions.  Since the commercial banks in the New York Fed's district elect its board of directors, the London Connection is able to use their American agents to pick the Bank's directors and ultimately control the whole Federal Reserve System.  He explained,
... The most powerful men in the United States were themselves answerable to another power, a foreign power, and a power which had been steadfastly seeking to extend its control over the young republic since its very inception. The power was the financial power of England, centered in the London Branch of the House of Rothschild.  The fact was that in 1910, the United States was for all practical purposes being ruled from England, and so it is today (Mullins, p. 47-48).

He remarked further that the day the Federal Reserve Act was passed in 1913, “the Constitution ceased to be the governing covenant of the American people, and our liberties were handed over to a small group of international bankers” (p. 29).

Clearly, there is a discrepancy between the two lists.  According to Kah, foreigners own shares of the New York Fed directly, but Mullins stated they owned and controlled the Fed indirectly through ownership of American banks.  So who is right?  Mullins cited the Federal Reserve Bulletin for his information on share ownership, but that publication has never reported the shareholder list of any Federal Reserve Bank.  Kah’s source is equally elusive – unnamed Swiss and Saudi Arabian contacts.  Despite the difficulty in verifying their sources, it may be possible that both men are correct.  The two authors published their lists eight years apart.  Since Mullins’ was the earlier of the two, it may be possible that sometime between 1983 and 1991 foreigners acquired a substantial amount of stock in the New York Fed.  Of course, it is also possible that they're both wrong.

To clarify this mystery, let’s first look at the Federal Reserve Act of 1913.  The law requires that all nationally chartered commercial banks and S&Ls buy stock in their regional Federal Reserve Bank, thereby becoming “member banks” (12 USCA §282).  State chartered banks may also join voluntarily.  The amount of stock a given bank must purchase is proportional to the bank’s size, so we would expect that the largest shareholders to be the biggest commercial banks operating in the district.  This agrees with Mullins since all of the banks on his list were the largest banks in the New York region in 1983.

Gary Kah’s list of alleged shareholders is more suspect.  The law does not permit the stock of a Federal Reserve Bank to be traded publicly like the stock of a typical corporation (12 USCA §286).  The original Federal Reserve Act called for each regional Bank to sell stock to raise at least $4 million to begin operations (12 USCA §281).  The stock was to be sold only to banks, not to the public.  Only in the event that sales to member banks did not raise the necessary $4 million would the regional Fed Banks be permitted to sell shares to the public.  However, all Banks raised the requisite amount of capital.  No stock in any Federal Reserve Bank has ever been sold to the public, to foreigners, or to any non-bank U.S. firm (Woodward, 1996).  Foreign interests comprise half of the alleged owners on Kah’s list.  Moreover, three of the hypothesized American owners are not even banks: Goldman-Sachs, Lehman Brothers, and Kuhn-Loeb are all investment banks, not commercial banks, and so are ineligible to own any shares of a Federal Reserve Bank.  The law prohibits the general public, non-bank firms, and foreigners from owning anything more than a trivial amount of stock in any Federal Reserve Bank (12 USCA §283).  The only institution on Kah's list that could possibly own shares of the New York Fed is Chase Manhatten.  All the others named on the list are incorrect.  Kah's list is mostly bunk.

Fortunately, we can take a more direct approach to the question of ownership of the New York Fed and the other Federal Reserve Banks.  The New York Fed reports that its eight largest member banks on June 30, 1997 were:

All of the major shareholders seen here and all of the banks on the complete list are either nationally- or state-charted banks.  All of them are American-owned.  Kah’s claim that foreigners directly own the N.Y. Fed is completely wrong.  This list is consistent, however, with Mullins in that all the owners are domestic banks functioning within the N.Y. Federal Reserve district.  The discrepancies are likely due to mergers or other significant changes in the size of district banks since the publication of Mullins’ list.  To obtain a list of member banks of other Federal Reserve banks, click here.
Global Domination Through the Back Door?

Although foreigners do not own the New York Federal Reserve Bank directly, perhaps, Mullins argued, they own and control it indirectly via ownership of domestic banks.  Since the money-center banks of New York own the largest portion of stock in the New York Fed, they hand-pick its board of directors and president.  This would give them, and hence the London Connection, control over Fed operations and U.S. monetary policy.

The Securities and Exchange Commission requires that firms whose stock is traded publicly report their major stockholders each year.  The reports identify all institutional shareholders (primarily, firms owning stock in other companies), all company officials who own shares in their firm, and any individual or institution owning more than 5% of the firm’s stock.  These reports show that only one of the N.Y. Fed’s current largest shareholders, Citicorp, has any major foreign stockholders.  As of January 1996, Price Alwaleed Bin Talad of Saudi Arabia owned 8.9% of Citicorp stock.2   None of the member banks on the above list have any significant portion of shares held by any foreign individual or institution.  Mullins' claim that foreigners own the N.Y. Federal Reserve indirectly is also wrong.

Moreover, the ownership rights of Federal Reserve Bank stock are different than the common stock of typical corporations.  Usually, the number of votes a shareholder has is proportional to the number of shares he owns.  However, ownership of Federal Reserve Bank stock entitles the shareholder to one vote when voting for its regional Federal Reserve Bank officials regardless of how many total shares the member bank may own.  A group of international conspirators would need to purchase a controlling interest in a majority of the banks operating in the N.Y. district to guarantee the election of their desired minions to the N.Y. Fed’s board of directors.  Buying that much stock in so many U.S. banks would require an outlay of hundreds of billions of dollars. Surely there must be a cheaper path to global domination.

Mullins’ premise here is that the member banks control the policies of the N.Y. Fed.  In the next section I detail why this is wrong, but an historical example also illustrates the fault of this assumption.  Galbraith (1990) recounts that in the spring of 1929 the New York Stock Exchange was booming.  Prices there had been rising considerably, extending the bull market that began in 1924.  The Federal Reserve Board decided to take steps to arrest the speculative bubble that appeared to be forming: It raised the cost banks had to pay to borrow from the Federal Reserve and it increased speculators’ margin requirements. Charles Mitchell, then the head of National City Bank (now Citicorp, one of the largest shareholders of the N.Y. Fed at the time), was so irritated by this decision that in a bank statement he wrote, “We feel that we have an obligation which is paramount to any Federal Reserve warning, or anything else, to avert any dangerous crisis in the money market” (Galbraith, p. 57).  National City Bank promised to increase lending to offset any restrictive policies of the Federal Reserve.  Wrote Galbraith, “The effect was more than satisfactory: the market took off again.  In the three summer months, the increase in prices outran all of the quite impressive increase that had occurred during the entire previous year” (Ibid).  If the Fed and its policies were really under the control of its major stockholders, then why did the Federal Reserve Board clearly defy the intent of its single largest shareholder?

Does the New York Fed Call the Shots?

Mullins and Kah both argue that by controlling the New York Federal Reserve Bank, the international banking elite command the entire Federal Reserve System and thus direct U.S. monetary policy for their own profit.  “For all practical purposes,” Kah writes, “the Federal Reserve Bank of New York is the Federal Reserve” (Kah, p.13; emphasis his).  This is the linchpin of their conspiracy theory because it provides the mechanism by which the international bankers can execute their plans.  A brief look at how the Fed’s powers are actually distributed shows that this key assumption in the conspiracy theory is wrong.

The Federal Reserve System is controlled not by the New York Federal Reserve Bank, but by the Board of Governors (the Board) and the Federal Open Market Committee (FOMC).  The Board is a seven-member panel appointed by the President and approved by the Senate.  It determines the interest rate for loans to commercial banks and thrifts, selects the required reserve ratio which determines how much of customer deposits a bank must keep on hand (a factor that significantly affects a bank’s ability create new credit), and also decides how much new currency Federal Reserve Banks may issue each year (12 USCA §248).  The FOMC consists of the members of the Board, the president of the New York Fed, and four presidents from other regional Federal Reserve Banks.  It formulates open market policy which determines how much in government bonds the Fed Banks may buy or sell – the major tool of monetary policy (12 USCA §263).

The key point is that a Federal Reserve Bank cannot change its discount rate or required reserve ratio, issue additional currency, or purchase government bonds without the explicit approval of either the Board or the FOMC.  The New York Federal Reserve Bank, through its direct and permanent representation on the FOMC, has more say on monetary policy than any other Federal Reserve Bank, but it still only has one vote of twelve on the FOMC and no say at all in setting the discount rate or the required reserve ratio.  If it wanted monetary policy to go in one direction, while the Board and the rest of the FOMC wanted policy to go another, then the New York Fed would be out-voted.  The powers over U.S. monetary policy rest firmly with the publicly-appointed Board of Governors and the Federal Open Market Committee, not with the New York Federal Reserve Bank or a group of international conspirators.

Mullins also made a great to-do about the Federal Advisory Council.  This is a panel of twelve representatives appointed by the board of directors of each Fed Bank.  The Council meets at least four times each year with the members of the Board to give them their advice and to discuss general economic conditions (12 USCA §261).  Many of the members have been bankers, a point not at all missed by Mullins. He speculates that this Council of bankers is able to force its will on the Board of Governors:

The claim that the “advice” of the council members is not binding on the Governors or that it carries no weight is to claim that four times a year, twelve of the most influential bankers in the United States take time from their work to travel to Washington to meet with the Federal Reserve Board merely to drink coffee and exchange pleasantries (Mullins, p. 45).
A point Mullins neglects entirely is that the Council has no voting power in Board meetings, and thus has no direct input into monetary policy.  In support of his hypothesis Mullins offers no evidence, not even an anecdote.  Moreover, his Council theory is inconsistent with his general thesis that the London Connection runs the Federal Reserve System via their imagined control of the N.Y. Fed.  If this were true, then why would they also need the Council?

Who Gets the Fed’s Profits?

Gary Kah and Thomas Schauf (1992) also maintain that the huge profits of the Federal Reserve System are diverted to its foreign owners through the dividends paid to its stockholders.  Kah reports “Each year billions of dollars are ‘earned’ by Class A stockholders of the Federal Reserve” (Kah, p. 20).  Schauf further laments by asking, “When are the profits of the Fed going to start flowing into the Treasury so that average Americans are no longer burdened with excessive, unnecessary taxes?”

The Federal Reserve System certainly makes large profits.  According to the Board’s 1999 Annual Report, the System had net income totaling $26.2 billion, which would qualify it as one of the most profitable companies in the world if the System were a typical corporation.  How were these profits distributed?  $342 million, or 1.4% of the profits, were paid to member banks as dividends.  Another $479 million, or 1.8%, was retained by the 12 Reserve Banks.  The balance of $25.4 billion -- or 96.9% of the profits -- was paid to the Treasury.  Obviously, Schauf's statement that the member banks are getting "billions" in dividends every year is absurd.  In addition, the Fed has been rebating its profits to the Treasury since 1947.


The allegation that an international banking cartel controls the Federal Reserve is wrong.  Contrary to Kah’s claim, foreigners do not own any stock in the New York Federal Reserve Bank.  Neither do they currently own any significant shares of the domestic banks that actually do own shares in the N.Y.    Fed.  Moreover, the central assumption that control of the New York Federal Reserve is the same as control of the whole System is badly mistaken.  Also, the profits of the Federal Reserve System, again contrary to the conspiracy theorists, are funneled almost entirely back to the federal government, not to an international banking elite.  If the U.S. central bank is in the grip of an international conspiracy, then Mullins, Kah, et al have certainly not uncovered it.


1.  State chartered banks have the option of becoming member banks of the Federal Reserve System.  Interestingly, only 10% of have done so.

2. Compact Disclosure CD-ROM, v3.0


82nd Annual Report, 1995,  Board of Governors of the Federal Reserve System,  U.S. Government  Printing Office.

Galbraith, John K. (1990), A Short History of Financial Euphoria.  New York: Whittle Direct Books.

Kah, Gary (1991),  En Route to Global Occupation. Lafayette, La.: Huntington House.

Mullins, Eustace (1983),  Secrets of the Federal Reserve.  Staunton, Va.: Bankers Research Institute.

Schauf, Thomas (1992),  The Federal Reserve, Streamwood, IL: FED-UP, Inc.

Woodward, G. Thomas (1996), “Money and the Federal Reserve System: Myth and Reality.”  Congressional Research Service.

United States Code Annotated, 1994.  U.S. Government Printing Office.

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