Who runs the Fed?

by guest author, professor of Law and Public Finance, Timothy A. Canova. I’ve been at two economic conferences with Tim, and admire his intellectual integrity. Tim’s article is excellent to answer the ever-important question: Cui bono?

First 558 words (of 3,413), courtesy of Dissent (full article here)

The 2008 financial crisis challenged many orthodox assumptions in finance and economics, including the proper role and accountability of central banks. The U.S. Federal Reserve, commonly known as the Fed, is the world’s most powerful central bank.

One major source of Federal Reserve power is its role as “lender of last resort,” lending directly to commercial banks through its so-called discount lending window. Traditionally, only commercial banks had access to the Fed’s discount lending since non-bank financial institutions were not subject to the same reserve and capital requirements as those imposed on banks. The other major source of the Fed’s power is its ability to purchase short-term Treasury securities. These restrictions on Fed lending and asset purchases helped support the central bank’s political independence from Congress and the White House by ensuring that Fed policy was socially neutral and did not favor particular sections of financial markets or particular private constituencies. But as the Federal Reserve’s lending and asset purchase powers expanded in unprecedented ways in 2008, these traditional restrictions were swept aside, exposing the flaws of central bank independence.

The Fed is also able to create money—U.S. dollars, also known as Federal Reserve notes—which means there is virtually no limit to the amount of money it can lend and no limit to the volume of assets it can purchase without adding to public-sector borrowing or deficits. During the 2008–2009 financial crisis, the Fed extended more than $16 trillion in low interest loans to all kinds of financial institutions in distress, including borrowers who traditionally lacked access to its discount window such as hedge funds and foreign commercial banks and central banks. Also, beginning in 2008, the Fed launched several asset purchase programs, known as “quantitative easing” (or QE), to purchase more than $3.5 trillion in U.S. Treasury securities and mortgage-backed securities (MBS).

But this expansion of the money supply is deceiving. Instead of lending out the funds pumped in by the Fed, banks have added more than $2.6 trillion to their excess reserves, on which the Fed has also paid them interest. This is similar to what happened during the Great Depression. Much of the money the Fed pushed into the banking system has not trickled down to the real economy.

Ben Bernanke, the Federal Reserve chairman when the QE programs were first launched, claimed that asset purchases would have a “wealth effect”: by the Fed purchasing bonds in such large amounts, bond prices would rise, yields would fall, and investors would shift into riskier securities, driving up the price of corporate shares and stock markets.  Everyone would feel richer, businesses would invest and consumers would spend more.  This seems much like the theory of “trickle-down” fiscal policy: that tax cuts for those with high incomes would be invested, thereby leading to the hiring of additional workers and spreading the benefits to the rest of the economy. But like the Bush administration’s tax cuts, the Fed’s monetary trickle-down has not worked so well. The Fed’s lending and asset purchase programs have effectively propped up Wall Street interests—big banks and financial markets—but they have also neglected the needs of Main Street, including the small community banks, small and moderate sized and family-owned businesses, unemployed and underemployed workers, and state and local governments.

Rest of article here for details of who really benefits from Fed policy.

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  • Anyone Home?

    Who owns the Fed? Look no further than this chart. The truth is: the Fed is connected to the largest multinational corporations in existence. Is it just a coincidence that all that QE money overwhelmingly benefited them? Well, I suppose if you believe in coincidences..http://www.save-a-patriot.org/files/view/whofed.html

    • Carl_Herman

      I’ve seen this chart for years, and need something stronger than this simple testimony. Anything more substantial?

      • Anyone Home?

        Look on the Fed website. The study is called “Federal Reserve: a Study of Corporate and Banking influence”– it covers all the connections to the Fed to the largest corporations in the world. The study is from 1973, but it’s still relevant.

      • Anyone Home?

        Also, please look into gold holdings by the Federal Reserve. A commissioner for the Fed admitted that the Fed hasn’t owned any gold since 1939, the year that FDR officially declared the United States bankrupt. GATA has traced the gold holdings to foreign central banks, most of which probably got it from the many coups and wars fought over the years. Oh, and to add more to your research, check out the link between gold and many of the interventions that have been sought over the years. After the ousting of Gaddafi, Libya’s central bank was ransacked of its gold, most of it was rumored to make it to the West where the central banks now hold it.

        Also, please look into Ukraine. While the coup was underway, black hawk helicopters landed on the lawn the central bank of Ukraine and emptied it of all its gold. It is said to be in the possession of the New York Fed, which was then given to the Dutch as a hush gift to cover up Ukraine’s role in the MH-17 tragedy! But it goes deeper than this: the bankers are launching coups around the world because the gold to back up their fiat ponzi scheme is gone. Ask yourself: if Gold is such a barbarous relic, why have both Russia and China built their gold reserves up to such enormous heights? Because they intend on crushing the US Treasury market, the linchpin of the Western financial system before they go down in a heap of flames:

        There are dots to be connected here, and boy, are they fantastic.

      • Anyone Home?

        People are afraid of a bubble in stocks–there certainly is, but the true bubble is in bonds. The Federal Reserve did not in fact end QE. Look at its balance sheet, it is still ballooning to upward of 4.5 trillion and counting. What they have been doing instead is JP Morgan has been buying the bonds at discount price from the FOMC where they are maturing as bank reserves, which they continually earn interest on. If people want to talk about a true collapse, look at the massive liquidity drought from all the reserve holdings of mega banks from the QE program. What we are seeing now is a deflationary Depression, which I believe will be followed by massive hyperinflation as the Fed tries to save as many treasury bonds as it can by monetizing the debt.

      • diogenes

        It’s revealing and telling how when we do start to ask these questions we get refered to these blizzards of flak. It’s like an onion: Oh, you don’t believe this cover-story, well, what about this one? Oh, you don’t believe that one either, well, let’s just peel another layer: how bout this one? It’s enough to make a person cry.

  • Anyone Home?
  • Anyone Home?
  • Anyone Home?
  • diogenes

    ATTENTION WEBSITE ADMIN: The Comments sections on at least two essays below have gone haywire:

    “Israel is not a democracy” and “The Deceit about being a republic versus a democracy”.

    • Carl_Herman

      Well said, diogenes; thank you. When we have arrests of War Criminals and bankster “leaders” (for fundamental fraud of calling debt “money,” manipulating markets, lying/hiding assets, and many areas of fraud), then AND ONLY THEN will we be able to rollback the facts to their sources.

      We won’t know the truth until we start with obvious crimes, enact lawful arrests, and then provide reasonable plea bargains to get the full truth. This will reveal the full bankster plot, including the owners.

  • cettel

    Carl, thanks so much for introducing me to that comprehensive article about the Federal Reserve system’s corruption.

    • diogenes

      Yes. And also:

    • Carl_Herman

      You’re welcome, Eric. Tim’s an awesome partner on our team. Thank you for your ongoing work and love for all our futures, Bro.

  • JerseyCynic

    The Four Companies That Control the 147 Companies That Own Everything:


  • Which Corporations Control the World? In short the Banksters!

    A surprisingly small number of corporations control massive global market shares. How many of the brands below do you use? It’s a Small World at the Top.

    Largest banks hold a total of $25.1 trillion

    1.) ICBC, China, $2.95 trillion in assets, over 18,000 outlets, 108 branches globally

    2.) HSBC holdings, UK, $2.68 trillion in assets, 6,600 offices in 80 countries, 55 million customers
    3.) Deutsche Bank, Germany, $2.6 trillion in assets, 2,963 branches, 70 countries, 46 million customers

    Enough to fund the federal U.S. government for over 7 years. Or roughly $3500 per person on earth.



  • Nixon Ends Bretton Woods International Monetary System

    On August 15, 1971, President Nixon announced on TV 3 dramatic changes in economic policy. He imposed a wage-price freeze. He ended the Bretton Woods international monetary system. And he imposed a temporary surcharge (tariff) on all imports. The Bretton Woods system was created towards the end of World War II and involved fixed exchange rates with the U.S. dollar as the key currency – but also a role for gold linked to the dollar at $35/ounce.