How is the Federal Reserve System truly structured then? Authorized by the Federal Reserve Act, it starts, by being divided in to twelve Federal Reserve banks, positioned strategically across the country to assure the masses of equal representation. Each bank has shareholders, which are private banks, each of whom is issued stock, which may not be sold or traded and receives a 6 per cent dividend per year by law. Holding stock in the banks gives members absolutely no voting or controlling interest; members do, however, elect six of the nine directors to their positions within the regional banks. Congress provides absolutely no direct funding to the System, and its decisions are not ratified or monitored by anyone within the executive or legislative branches; the Federal Reserve is mandated by law, as most central banks are, to uphold the “overall objectives of economic and financial policy established by the government.”

The chairman and seven governors of the Federal Reserve Board are appointed by the President of the United States for a maximum term of 14 years, and are confirmed by the Senate. By law, these governors must represent a “fair representation of the financial, agricultural, industrial, and commercial interests and geographical divisions of the country,” and they must originate from different areas of the twelve Federal Reserve districts (determined based on the locations of the banks). These appointments cannot be revoked due to policy disputes, and are staggered such that a President who serves two terms will not have appointed a majority until late in his second term, under ideal conditions; in reality, governors often do not serve their full terms. The chairman and vice chairman are decided upon every four years by the President, and serve as a spokesperson of the entire board.

The Chairman reports twice a year to Congress on the Federal Reserve’s “monetary policy objectives,” and receives a wage of just under $200,000. These reports contain some level of accountability information — at least to the extent of appeasement, though they are subject to no formal review and cannot be subjected to mandatory reviews from the Government Accountability Office.

These seven members of the established board, combined with five of the twelve presidents of the regional Federal Reserve Banks (rotated, with exception of the largest regional bank, the Federal Reserve Bank of New York) formulate the voting members of the Federal Open Market Committee. All Federal Reserve Bank presidents are expected to attend the meetings, even when they are not voting members. This Committee meets eight times a year to formulate predictions and strategies for dealing with economic policy — during periods of crisis, emergency meetings of the FOMC are not unheard of. Minutes of these meetings are made publicly available, delayed based on a number of factors; a number of critics suggest that these minutes are stripped to their bare minimums, and full of what the public calls “Fed speak,” economic terminology that includes a number of derivative terms that are left entirely unexplained. Before 1994, the Federal Reserve did not release transcripts of their meetings whatsoever — even when presented with Freedom of Information Act requests the Federal Reserve testified to the belief that the Reserve Banks were not federal agencies.

As of recently, the transparency of the Federal Reserve has come back in to question. With $2.2 trillion in loans to banks which current Chairman Bernanke says cannot be disclosed in the interests of the “effectiveness” of the system, a number of politicians, including the libertarian advocate from Texas, Ron Paul, have introduced legislation which would bring forth a new level of accountability for the Federal Reserve, one which may be entirely unprecedented.

“If our nation can issue a dollar bond, it can issue a dollar bill. The element that makes the bond good, makes the bill good, also. The difference between the bond and the bill is the bond lets money brokers collect twice the amount of the bond and an additional 20%, where as the currency pays nobody but those who contribute directly in some useful way. Is it absurd to say that our country can issue $30 million in bonds and not $30 million in currency? Both are promises to pay, but one promise fattens the usurers and the other helps the people.” — Thomas A. Edison.

1. Criticisms of the Fed
2. Eustace Mullins and Ezra Pound's Conspiracy
3. Structure of the Fed
4. View all pages.

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