Talk:Federal Reserve/FAQ

Q1: Is the Federal Reserve private or public/governmental?

A1: The Federal Reserve is not one entity but several, and each has its own status in relation to the government. The Board of Governors, which supervises the system, is a federal government agency. The twelve Federal Reserve Banks are privately owned corporations organized under the Federal Reserve Act that have public responsibilities. They are not organized under the laws that govern other private corporations, such as for-profit businesses.

Q2: Who owns the Federal Reserve?

A2: There are multiple answers depending on which part of the Federal Reserve is meant.

• The Board of Governors is a government agency that uses government-owned facilities.
• Each Federal Reserve Bank is owned by the member banks in its region. That ownership entitles them to receive limited dividends and to vote for some of its directors.
• The government receives the Federal Reserve Banks' excess earnings (profit).

Q3: Does the court case Lewis v. United States (1982) prove that the Fed is a private bank?

A3: Lewis v. United States held that a man injured by a Federal Reserve Bank's vehicle could not sue the federal government for damages. The court decided that for the purpose of a tort claim, the Reserve Bank was not a federal agency, because the government did not control its detailed activities and day-to-day operations. The decision noted that in other cases, for other legal purposes, courts have treated Reserve Banks as government-affiliated entities.

Q4: Why is the structure of the Federal Reserve so complicated?

A4: The structure reflects the development of the Federal Reserve over time from a regional system into a de facto centralized system. The original Federal Reserve Act provided for banks to cooperate with each other and the government on a regional basis to meet credit demands. This was intended to prevent banks in more commercial parts of the country from dominating others. Each Federal Reserve Bank managed credit within its region, while the Board carried out regulatory and policy functions. (House Report 69 (1913), pp. 17–19). The Banking Act of 1935 increased the authority of the Board and the status of the Reserve Bank of New York, while reducing the role of the other Reserve Banks.

Q5: Does the Federal Reserve have a connection with federal income tax?

A5: Yes. The Federal Reserve Act and the first "modern" income tax were both enacted in late 1913 by Woodrow Wilson, who saw them as ways to strengthen the federal government against the large business interests of the time. Although they were enacted around the same time, each proposal had its own separate political history. Additionally, the Federal Reserve processes payments for the federal government. Therefore, any payment to the US Treasury (including income tax) is eventually deposited to the Treasury's account at the Federal Reserve Bank of New York and becomes part of the government's operating cash.

Q6: Does the Federal Reserve have a connection with the national debt?

A6: Yes. The Federal Reserve Banks are significant owners of federal debt securities, about $5.6 trillion or 18% of the debt as of June 2022. They draw part of their income from these holdings, which they use to pay their expenses and dividends before remitting their earnings to the Treasury. The Federal Reserve Bank of New York also conducts (but does not participate in) auctions of new federal debt securities. Fiscal policy — how the government raises and spends money — is decided by Congress, not by the Federal Reserve.

Q7: Did Woodrow Wilson regret creating the Fed?

A7: No. A supposed regretful quote from him ("I am a most unhappy man...") is assembled from words that he said and wrote, but not about creating the Fed. See the Wikiquote page for Wilson.

Q8: I have a book/web site/video that contradicts these answers.

A8: Works claiming that the Federal Reserve is the creation of a sinister banker conspiracy have been raised here many times before. There are separate articles about writers and works that make such claims, like G. Edward Griffin and America: Freedom to Fascism. However, they are not mentioned in this article, because they are not widely acknowledged among authors who write about the Fed, even to criticize it. Wikipedia aims to fairly represent the significant points of view on a subject but not to promote fringe theories held by a tiny minority of adherents.

Q9: Where can I find more answers about the Federal Reserve?

A9: The Board of Governors has its own frequently asked questions list.