http://en.wikipedia.org/wiki/Federal_Re ... government


Balance between private banks and responsibility of government
The system was designed out of a compromise between the competing philosophies of privatization and government regulation.[19] While planning the design of the system, some people wanted the system to have generally private aspects whereas others wanted more government involvement. The system that resulted ended up being a compromise between these two philosophies. In 2006 Donald L. Kohn, vice chairman of the Board of Governors, summarized the history of this compromise:[22]

Agrarian and progressive interests, led by William Jennings Bryan, favored a central bank under public, rather than banker, control. But the vast majority of the nation's bankers, concerned about government intervention in the banking business, opposed a central bank structure directed by political appointees. The legislation that Congress ultimately adopted in 1913 reflected a hard-fought battle to balance these two competing views and created the hybrid public-private, centralized-decentralized structure that we have today.

In the current system, private banks are for-profit businesses but government regulation places restrictions on what they can do. The Federal Reserve System is the part of government that regulates the private banks. The balance between privatization and government involvement is also seen in the structure of the system. Private banks elect members of the board of directors at their regional Federal Reserve Bank while the members of the Board of Governors are selected by the President of the United States and confirmed by the Senate. The private banks give input to the government officials about their economic situation and these government officials use this input in Federal Reserve policy decisions. In the end, private banking businesses are able to freely run a profitable business while the U.S. government, through the Federal Reserve System, oversees and regulates the activities of the private banks.

Government regulation and supervision
The Board of Governors is the part of the Federal Reserve System that is responsible for supervising the private banks. A general description of the types of regulation and supervision involved is given by the Federal Reserve:[11]

The Board also plays a major role in the supervision and regulation of the U.S. banking system. It has supervisory responsibilities for state-chartered banks that are members of the Federal Reserve System, bank holding companies (companies that control banks), the foreign activities of member banks, the U.S. activities of foreign banks, and Edge Act and agreement corporations (limited-purpose institutions that engage in a foreign banking business). The Board and, under delegated authority, the Federal Reserve Banks, supervise approximately 900 state member banks and 5,000 bank holding companies. Other federal agencies also serve as the primary federal supervisors of commercial banks; the Office of the Comptroller of the Currency supervises national banks, and the Federal Deposit Insurance Corporation supervises state banks that are not members of the Federal Reserve System.
Some regulations issued by the Board apply to the entire banking industry, whereas others apply only to member banks, that is, state banks that have chosen to join the Federal Reserve System and national banks, which by law must be members of the System. The Board also issues regulations to carry out major federal laws governing consumer credit protection, such as the Truth in Lending, Equal Credit Opportunity, and Home Mortgage Disclosure Acts. Many of these consumer protection regulations apply to various lenders outside the banking industry as well as to banks.
Members of the Board of Governors are in continual contact with other policy makers in government. They frequently testify before congressional committees on the economy, monetary policy, banking supervision and regulation, consumer credit protection, financial markets, and other matters.
The Board has regular contact with members of the President’s Council of Economic Advisers and other key economic officials. The Chairman also meets from time to time with the President of the United States and has regular meetings with the Secretary of the Treasury. The Chairman has formal responsibilities in the international arena as well.

Preventing asset bubbles
The board of directors of each Federal Reserve Bank District also have regulatory and supervisory responsibilities. For example, a member bank (private bank) is not permitted to give out too many loans to people who cannot pay them back. This is because too many defaults on loans will lead to a bank run. If the board of directors has judged that a member bank is performing or behaving poorly, it will report this to the Board of Governors. This policy is described in United States Code, Title 12, Chapter 3, subchapter 7, section 301:[23]

Each Federal reserve bank shall keep itself informed of the general character and amount of the loans and investments of its member banks with a view to ascertaining whether undue use is being made of bank credit for the speculative carrying of or trading in securities, real estate, or commodities, or for any other purpose inconsistent with the maintenance of sound credit conditions; and, in determining whether to grant or refuse advances, rediscounts, or other credit accommodations, the Federal reserve bank shall give consideration to such information. The chairman of the Federal reserve bank shall report to the Board of Governors of the Federal Reserve System any such undue use of bank credit by any member bank, together with his recommendation. Whenever, in the judgment of the Board of Governors of the Federal Reserve System, any member bank is making such undue use of bank credit, the Board may, in its discretion, after reasonable notice and an opportunity for a hearing, suspend such bank from the use of the credit facilities of the Federal Reserve System and may terminate such suspension or may renew it from time to time.

The punishment for making false statements or reports which overvalue an asset is stated in U.S. Code, Title 18, Part 1, Chapter 47, Section 1014:[24]

Whoever knowingly makes any false statement or report, or willfully overvalues any land, property or security, for the purpose of influencing in any way...shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both.

These aspects of the Federal Reserve System are the parts intended to prevent or minimize speculative asset bubbles which ultimately lead to severe market corrections.


National payments system
[11]The Federal Reserve plays an important role in the U.S. payments system. The twelve Federal Reserve Banks provide banking services to depository institutions and to the federal government. For depository institutions, they maintain accounts and provide various payment services, including collecting checks, electronically transferring funds, and distributing and receiving currency and coin. For the federal government, the Reserve Banks act as fiscal agents, paying Treasury checks; processing electronic payments; and issuing, transferring, and redeeming U.S. government securities.

In passing the Monetary Control Act of 1980, Congress reaffirmed its intention that the Federal Reserve should promote an efficient nationwide payments system. The act subjects all depository institutions, not just member commercial banks, to reserve requirements and grants them equal access to Reserve Bank payment services. It also encourages competition between the Reserve Banks and private-sector providers of payment services by requiring the Reserve Banks to charge fees for certain payments services listed in the act and to recover the costs of providing these services over the long run.

The Federal Reserve plays a vital role in both the nation’s retail and wholesale payments systems, providing a variety of financial services to depository institutions. Retail payments are generally for relatively small-dollar amounts and often involve a depository institution’s retail clients—individuals and smaller businesses. The Reserve Banks’ retail services include distributing currency and coin, collecting checks, and electronically transferring funds through the automated clearinghouse system. By contrast, wholesale payments are generally for large-dollar amounts and often involve a depository institution’s large corporate customers or counterparties, including other financial institutions. The Reserve Banks’ wholesale services include electronically transferring funds through the Fedwire Funds Service and transferring securities issued by the U.S. government, its agencies, and certain other entities through the Fedwire Securities Service. Because of the large amounts of funds that move through the Reserve Banks every day, the System has policies and procedures to limit the risk to the Reserve Banks from a depository institution’s failure to make or settle its payments.

The Federal Reserve Banks began a multi-year restructuring of their check operations in 2003 as part of a long-term strategy to respond to the declining use of checks by consumers and businesses and the greater use of electronics in check processing. The Reserve Banks will have reduced the number of full-service check processing locations from 45 in 2003 to 4 by early 2011.[25]


Structure

Independent within government
Further information: Central bank#Independence, List of United States independent agencies, and Independent agencies of the United States government
The Federal Reserve System is an independent government institution that has private aspects. The System is not a private organization and does not operate for the purpose of making a profit. The stocks of the regional federal reserve banks are owned by the banks operating within that region and which are part of the system.[26] The System derives its authority and public purpose from the Federal Reserve Act passed by Congress in 1913. As an independent institution, the Federal Reserve has the authority to act on its own without prior approval from Congress or the President.[27] The members of its Board of Governors are appointed for long, staggered terms, limiting the influence of day-to-day political considerations.[28] The Federal Reserve System's unique structure also provides internal checks and balances, ensuring that its decisions and operations are not dominated by any one part of the system. It also generates revenue independently without need for Congressional funding. Congressional oversight and statutes, which can alter the Fed's responsibilities and control, allow the government to keep the Federal Reserve System in check. Since the System was designed to be independent whilst also remaining within the government of the United States, it is often said to be "independent within the government."[27]

The 12 Federal Reserve banks provide the financial means to operate the Federal Reserve. Each reserve bank is organized much like a private corporation so that it can provide the necessary revenue to cover operational expenses and implement the demands of the board. Member banks are privately owned banks that must buy a certain amount of stock in the Reserve Bank within its region to be a member of the Federal Reserve System. This stock "may not be sold, traded, or pledged as security for a loan" and all member banks receive a 6% annual dividend.[27] These member banks must maintain fractional reserves either as vault cash or on account at its Reserve Bank; member banks earn no interest on either of these. The dividends paid by the Federal Reserve Banks to member banks are considered partial compensation for the lack of interest paid on the required reserves. All profit after expenses is returned to the U.S. Treasury or contributed to the surplus capital of the Federal Reserve Banks (and since shares in ownership of the Federal Reserve Banks are redeemable only at par, the nominal "owners" do not benefit from this surplus capital); the Federal Reserve system contributed over $29 billion to the Treasury in 2006.[29]


Outline

Organization of the Federal Reserve SystemThe Federal Reserve System as a whole[19]

The nation's central bank
A regional structure with 12 districts
Subject to general Congressional authority and oversight
Operates on its own earnings
Board of Governors

7 members serving staggered 14-year terms
Appointed by the U.S. President and confirmed by the Senate
Oversees System operations, makes regulatory decisions, and sets reserve requirements
Federal Open Market Committee

The System's key monetary policymaking body
Decisions seek to foster economic growth with price stability by influencing the flow of money and credit
Composed of the 7 members of the Board of Governors and the Reserve Bank presidents, 5 of whom serve as voting members on a rotating basis
Federal Reserve Banks

12 regional banks with 25 branches
Each independently incorporated with a 9-member board of directors, with 6 of them elected by the member banks while the remaining 3 are designated by the Board of Governors.
Set discount rate, subject to approval by Board of Governors.
Monitor economy and financial institutions in their districts and provide financial services to the U.S. government and depository institutions.
Member banks[16]

Private banks
Hold stock in their local Federal Reserve Bank
Elect six of the nine members of Reserve Banks’ boards of directors.
Advisory Committees

carry out varied responsibilities

Board of Governors
The seven-member Board of Governors is the main governing body of the Federal Reserve System. It is charged with overseeing the 12 District Reserve Banks and with helping implement national monetary policy. Governors are appointed by the President of the United States and confirmed by the Senate.[30], one on Jan. 31 of every even-numbered year, for staggered, 14-year terms.[16] As an independent federal government agency,[31] the Board of Governors does not receive funding from Congress, and the terms of the seven 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 functions mostly independently. The Board is required to make an annual report of operations to the Speaker of the U.S. House of Representatives.[32] It also supervises and regulates the operations of the Federal Reserve Banks, and US banking system in general.

Membership is generally limited to one term. However, if someone is appointed to serve the remainder of another member's uncompleted term, he or she may be reappointed to serve an additional 14-year term.[33] Conversely, a governor may serve the remainder of another governor's term even after he or she has completed a full term. The law provides for the removal of a member of the Board by the President "for cause."[33]


Ben Bernanke, chairman of the Board of Governors of the Federal Reserve System.The current members of the Board of Governors are:

Ben Bernanke, Chairman
Donald Kohn, Vice-Chairman
Frederic Mishkin
Kevin Warsh
Randall Kroszner*
Elizabeth A. Duke
Vacancy*
(*Because the Senate Banking Committee had refused to hold hearings on appointments to fill the vacant positions until a new President takes office, there is currently one vacancy. Governor Duke was confirmed by the Senate after a year-long delay on June 27, 2008, and she was sworn into office on August 5, 2008. Governor Kroszner's term has also expired, but the law allows him to remain in office until a successor is confirmed)

All current members of the Board of Governors have taken office during the presidency of George W. Bush.


Federal open market committee
The Federal Open Market Committee (FOMC) created under 12 U.S.C. § 263 comprises the seven members of the board of governors and five representatives selected from the regional Federal Reserve Banks. The FOMC is charged under law with overseeing open market operations, the principal tool of national monetary policy. These operations affect the amount of Federal Reserve balances available to depository institutions, thereby influencing overall monetary and credit conditions. The FOMC also directs operations undertaken by the Federal Reserve in foreign exchange markets. The representative from the Second District, New York, (currently Timothy Geithner) is a permanent member, while the rest of the banks rotate at two- and three-year intervals. All the presidents participate in FOMC discussions, contributing to the committee’s assessment of the economy and of policy options, but only the five presidents who are committee members vote on policy decisions. The FOMC, under law, determines its own internal organization and by tradition elects the Chairman of the Board of Governors as its chairman and the president of the Federal Reserve Bank of New York as its vice chairman. Formal meetings typically are held eight times each year in Washington, D.C. Nonvoting Reserve Bank presidents also participate in Committee deliberations and discussion. The FOMC generally meets eight times a year in Telephone consultations and other meetings are held when needed.[11]


Transparency issues
There has been considerable debate over a lack of transparency as to what is discussed in Federal Open Market Committee meetings.[34] Since the FOMC sets monetary policy, which affects the entire U.S. economy, many people feel that it is important to know what the FOMC is doing.

Board of directors
The nine member board of directors of each district is made up of 3 classes, designated as classes A, B, and C. The directors serve a term of 3 years. The makeup of the boards of directors is outlined in U.S. Code, Title 12, Chapter 3, Subchapter 7:[37]

Class A:

three members
chosen by and representative of the stockholding banks.
member banks are divided into 3 groups based on size—large, medium, and small banks. Each group elects one member of Class A.
Class B:

three members
represent the public with due but not exclusive consideration to the interests of agriculture, commerce, industry, services, labor, and consumers.
member banks are divided into 3 groups based on size—large, medium, and small banks. Each group elects one member of Class B.
No director of class B shall be an officer, director, or employee of any bank
Class C:

three members
designated by the Board of Governors of the Federal Reserve System. They shall be elected to represent the public, and with due but not exclusive consideration to the interests of agriculture, commerce, industry, services, labor, and consumers.
No director of class C shall be an officer, director, employee, or stockholder of any bank
Shall have been for at least two years residents of the district for which they are appointed, one of whom shall be designated by said board as chairman of the board of directors of the Federal reserve bank and as Federal reserve agent.
A list of all of the members of the Reserve Banks' boards of directors is published by the Federal Reserve.[38]

http://www.fdrs.org/federal_reserve_system.html

http://www.answers.com/topic/fed-federal-reserve-system

http://www.libertyforlife.com/banking/f ... _bank.html

http://www.the7thfire.com/Politics%20an ... serve.html

Not to sound like too much of a penis, but what's the point of that post?

regardless of whether or not the gov't own the fed, when they are bailing out these banks and mortgage lenders, they in turn take on those loans, virtually owning those banks and the houses, cars, etc. that comes with it. whether the fed is a private band or part of the gov't, it is not good to have one central entity with that much power over the public.

if you've been watching the news about this "bail out" they are discussing giving the fed/treasury the power to "foreclose" on whichever mortgages they want to. basically if you piss them off or don't do what they tell you to do, you lose your house, car, and whatever else they own due to your debt.

i'll refer back to a part of durango's post...

Wow.

That was IN THE PAST.

GWB got a DWI while in F*CKING office. Who cares, it's the present and future that matters.

And Durango, if you expect anyone to read those F*CKING novels you post, you're crazy.

I don't trust wikipedia, anyway.

oh, if the fed isn't a private bank and they are part of the gov't, then how come the fed still has $700B to give away when our nation is trillions in debt?

I was criticizing the conspiracy theory put forward in Zeitgeist.

Also, are you suggesting that we should do what Thomas Jefferson wanted (200 years ago) and have individuals/small groups printing money?



The whole reason the bailout is so opposed in Congress is that the fed doesn't have that money, they want it to come out of taxes.

so is the history of the country and world insignificant? is that why you have no faith? because the biblical documents weren't created 5 minutes ago or tomorrow? i'm sorry but that just didn't make sense to me.

Thomas Jefferson was referring to not allowing a private bank control our currency, but to keep it in the gov't/treasury. someone correct me if i'm wrong, but i think that when the fed was created, they took over the money printing instead of the treasury.

if the fed doesn't have the money how are they going to give it to anyone? the fed would be lending the money to our government, which yes, the gov't would have to pay back. what does the gov't do when they need money? tax the F*CK out of the public. this would be ANOTHER illegal tax (meaning against our constitution) just like the federal income tax.

Right; the proposed bailout would come straight out of taxpayers pockets, no one is denying that and that's why Congress is currently shooting it down.

I'm not denying that the fed has enormous power; that's been carefully planned in order to stabilize the economy (whether or not it's worked is a different question). What I'm saying is that the zeitgeist-style "the fed owns the government and makes money off our economic downturns" conspiracy theory is wrong.

FYI: irrelevant to the discussion, but interesting...$700 billion is about $140 billion more than Congress has directly spent on the Iraq war.

i hope you're right judi, but only time will tell.

Well, I wasn't trying to argue the merits of the federal reserve system (the economic reasoning behind it makes sense, but we've still had major economic problems since it was put in place...but then again you could say "it would have been even worse without the fed").

All I'm saying is that some of the claims the director/narrator/whatever made in Zeitgeist are factually untrue. Namely, the fed is not private, and its profits flow directly into the US treasury.

that's the first time i've heard anything about the fed's profits going to our gov't, but i haven't spent much time trying to research that... yet. when i have time i will check into it and quickly admit if i have made false statements.

http://www.federalreserve.gov/generalin ... faqfrs.htm

Good basic info; it IS from the fed's website so it could be accused of being biased, but I think it's pretty much only facts about the system.

i plan on researching more about the law that was passed which created the fed. i will read the info from the fed's website later, but i am always skeptical when i get information directly from the gov't like that, because we've been lied to too many times.

http://www.law.cornell.edu/uscode/html/ ... -000-.html

U.S. Code, Title 12, Section 290:

The net earnings derived by the United States from Federal reserve banks shall, in the discretion of the Secretary, be used to supplement the gold reserve held against outstanding United States notes, or shall be applied to the reduction of the outstanding bonded indebtedness of the United States under regulations to be prescribed by the Secretary of the Treasury. Should a Federal reserve bank be dissolved or go into liquidation, any surplus remaining, after the payment of all debts, dividend requirements as hereinbefore provided, and the par value of the stock, shall be paid to and become the property of the United States and shall be similarly applied.

Patriotic sensationalism. You can't relate a current vying leader's past mistakes TO THE HISTORY OF THE F*CKING COUNTRY.



Such a lame assumption. You don't need to know why I don't have faith, even still, the answer is intuitive.



Also, don't F*CKING relate my lack of faith to this issue. Cheap shotting bastard. If McCain had a drug filled past, would you scrutinise him as much?

People can reform you know, or are you just too dense?

first of all, i never said anything about whether or not people can reform or change.

second of all, i was merely challenging your blanket comment about how the past doesn't matter, because the recent posts pertained TO THE HISTORY OF THE F*CKING COUNTRY and not stupid bush getting a dwi.

third of all, learn to have an intelligent conversation without attacking the people you're conversing with. you have been offensive all night with your posts without being provoked.

Point missed, the point is, would you give McCain a pass if he had a troubled past, and if he had blatantly changed for the better in the present, would you even consider his past in terms of the election?

I think there's been a little misunderstanding here.

This thread quickly digressed from the "obama character" discussion to talking about the federal reserve system.

When cupofsoup came in, he was talking about how what Obama did in his past isn't all that important. That's fine, but it didn't follow the flow of the thread so -purple- thought he was talking about the history of the fed that we've been discussing.

So...chillamos?