Talk:Federal Reserve System

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[edit] Old messages

I don't know where to put this, so here it goes: Under "some interesting facts" at the Federal Reserve page, it reads:

"The Fed has over 11 billion in gold which is a holdover from the days the government used to back US Notes and Federal Reserve Notes with gold."

In correspondence to N.M.Sheedy from a member of the Federal Reserve Board's staff, December 4, 2007, "JPD" wrote: "The Federal Reserve owns no gold. The Federal Reserve Bank of New York is the only Reserve Bank that has gold in its vault, but this gold belongs to foreign countries."

The idea that the federal Reserve would hold gold in its reserves seems very strange to me becasue, as I understand it, there would have been no need for the Federal Reserve to hold gold to cover Federal Reserve Notes. If the Federal Reserve ever held gold, or holds gold now, it would be the property of the stockholders of the Federal Reserve banks where the gold is kept. The Federal Reserve never backed its federal reserve notes with gold, did it? If such gold was intended to back paper notes, it would have been the fiduciary responsibility of the U.S. Treasury. As such, the Federal Reserve could not own or hold gold to back U.S. Currency, as the gold that backed U.S. Curreny could not be owned by the Federal Reserve Banks, but rather it is held by the U.S. Treasury. Many U.S. Treasure notes were backed by gold (and others by silver), but the gold to cover them was--and still is (well, what is left of that gold)--held by the U.S. Treasury at Fort Knox and other U.S. Treasury depositories and mints.

So the questions are: Did the Federal Reserve ever hold gold to cover notes that were redeamable for gold? Is any gold held by the Federal Reserve now, or by one or more of the the regional Federal Reserve Banks? (Correspondence from the Federal Reserve Board Staff indicates that the answer is NO.)

Excellent question!!! Does any one have an answer?

See the fed's annual financial statements: page 21. The Fed owns gold certificates issued by the treasury at a fixed price of gold. So, In interpret this as the Fed essentially borrowing the gold. Note that the amounts are trivial (by the Fed's standards). I believe this is how it was done in the past: Treasury owned the gold, Fed borrowed it for currency backing purposes.--Gregalton (talk) 08:03, 21 February 2008 (UTC)

[edit] Who Funds It?

This is a topic, like much of economics, that seems overly mystified. Where does the funding for this organization come from? The taxpayers, private financial institutions or both? The implication seems to be the latter, but this should be explained in a more obvious way. Moreover, it should be explained to what extent this central bank differs from the personal bank account of the U.S. government which I assume it isn't or is more than. Also, clearly not all capital in the U.S. emanates from this institution, just the largest portion? What is its relationship with the U.S. Treasury? Is our currency the currency of this bank? Is the federal reserve really the "Third Bank of the United States," controversies over the previous two being something I found rather obscure. It's precisely this aura of mystery, as with the Masons, that plays into the affinity the ignorant have for conspriacy theories regarding it. Finally to what extent or degree is it interconnected with the broader economy and economic trends that it can only mitigate and control in the manner of a sytem of levees and dikes?Tom Cod 07:00, 1 November 2007 (UTC)

Actually, this wikipedia page IS a conspiracy theory, since NOBODY apparently has salient facts about what is the most important institution in a supposedly free society. So, we are all--including Congress and wikipedia--left with conspiracy theories. But, I'm sure you meant that term 'conspiracy theory" as a term of derision since you descibe is an an "affinity of the ignorant", implying that there is something YOU know they don't. —Preceding unsigned comment added by 69.109.164.27 (talk) 09:59, 19 March 2008 (UTC)

The Federal Reserve is completely self-sufficient for funding. It is run with funds it generates from interest earned in holding the federal debt. Be advised, however, that this constitutes a very small percentage of this interest, and the rest of the interest is returned to the Treasury.Stanleywinthrop 19:54, 13 November 2007 (UTC)

The Fed generates income by charging banks for various services - i.e., check processing. 71.214.77.236 (talk) 22:19, 17 November 2007 (UTC)

It is actually quite clear how the Fed is funded; they buy government securities in the open market by crediting the primary dealers' accounts and receives interest on those securities. Any amount that exceeds the cost of their operation goes back to the Treasury. Dotter (talk) 01:44, 6 December 2007 (UTC)

The ignorant... lol. Conspiracy theorists! The fed is just confusing and oblique... nothing more! When has money and power ever persuaded anyone to do anything inconsistant with public motives. A conspiracy indeed, ignorant people. —Preceding unsigned comment added by 12.177.23.62 (talk) 21:37, 12 December 2007 (UTC)

Yes, I'm sure it is pretty confusing to the uneducated such as yourself. Good luck with life..... 71.214.93.114 (talk) 07:11, 17 December 2007 (UTC)

Well, I'm still somewhat confused. Surely the assets that the Fed lends out to member banks originate from somewhere besides its interest and charges. Do other member banks help to capitalize as a "central bank"? Moreover, given that paper currency is denominated as "Federal Reserve Notes" does this imply that our currency is that of this institution? Having grown up around Washington., D.C. I know that paper money is issued by the Bureau of Engraving and Printing, a US government agency.
Again I think the lack of information about this institution helps create the aura of mystery around it that contributes to the mentality of conspiracy theorists. The Constitution as I recall authorizes the government-gives it a monopoly- on of the issuance of hard currency. Prior to the evolution of central banks, much of paper currency-more of a novelty then than credit cards today-was issued by individual banks (states being prohibited as I recall), contributing to instablity. Concern, even hysteria, about paper money v. metal specie seems largely based in mysticism as metal has little more instrinsic value than paper, the material difference being that it is less rarified and can be issued much more quickly creating a situation where irresponsible authorities can exacerbate inflation by increasing the supply of the same radically out of proportion with the supply of goods and services, the barter or exchange of which money evolved to mediate (leaving aside money itself as a commodity). For example Imperial Spain had inflation in gold when their society became gorged with that metal without a corresponding increase in production. Thus in a Road Warrior type situation of extreme crisis, don't rely on possession of money or precious metals so much as canned goods, tools, fuel etc. Tom Cod (talk) 00:10, 28 December 2007 (UTC)
Have you read the Federal Reserve Act? When the Fed executes outright purchases, they are creating money. In other words, they buy government securities with the money that they "print" (I mean that figuratively). Since it doesn't cost them anything to buy government securities, the money doesn't have to originate anywhere; the Fed just collects the interest and uses it for operation and returns the rest to the Treasury. Dotter (talk) 05:42, 28 December 2007 (UTC)
So, in simple words, the FED funds itself simply by "printing" money, right ? 79.210.97.38 (talk) 19:40, 1 May 2008 (UTC)
No, the Fed does not fund itself simply by printing money. The Fed doesn't print money at all. That's the Bureau of Engraving and Printing that prints money for the US Treasury. In simple words, the Fed funds itself by charging member banks for the services it provides. Everything they make beyond operating expenses goes back to the Treasury. Bagheera (talk) 15:57, 19 May 2008 (UTC)
Most of the funding for the Federal Reserve comes from the interest of U.S. Treasury securities[1] along with interest from foreign securities, loans, and central banking services. As mentioned earlier, net Income is return to the Treasury. In addition, to issue new or redistribute existing notes, the Federal Reserve must hold assets against those notes that are issued.[2] I thought this information was already in the article, is it not? --EGeek (talk) 02:57, 20 May 2008 (UTC)
I think you're right in that most of the 'mystery' about how the Fed's funded is explained in the article. My comment above was overly simplified in response to the previous "they print their own money" comment. The Fed maintains some pretty good websites of their own (you linked to a couple examples) and aren't really as mysterious as people seem to think. Of course, economics and politics can be hard to understand in any case. Cheers. Bagheera (talk) 18:38, 29 May 2008 (UTC)

[edit] Welcome to Wikipedia!

Todays lesson is about the Federal Reserve. What is it? well, it's kind of a quasi sorta government institution but still sorta like a quasi private kinda thing. The folks that run it get real rich but don't really make a profit becuase they give some of the money they don't need back to the real government every year. Oh yeah- they also print money and send most of it it all over the world. We pay them interest for that. They took charge back in 1913 (a few years before the great depression) They generally are made up of banks- some are even US banks. The oversight is by, well, no one really. But a lot of people think they do a great job because Americans still have a lot of stuff. Glad we could clear that up.Just-unsigned (talk) 21:33, 25 January 2008 (UTC)

Amusing synopsis. Almost completely wrong, but still amusing to read. Bagheera (talk) 22:07, 19 March 2008 (UTC)

By the way, do you think gold is pretty? I do. but the Federal Reserve doesn't think so, since gold doesn't change in value... they can't put an interest rate on gold. that's why they charge us for the printing. it all makes sense if you think about it. they make money, we pay for that money, they raise the dollar value, and then we have lot of stuff! it's a happy, never-ending system of bliss and happiness. let's keep it that way, because we can trust them for years to come.

)
It must be tough screaming about how bad the Fed is when no one listens. Or perhaps I should say be no rational person listens. 71.214.64.177 (talk) 03:20, 4 February 2008 (UTC)
What does gold have to do with the Federal Reserve? The Fed isn't the one who took the United States off a gold standard. And the actual physical gold held by the fed isn't their gold. It's all in the vault in FRB New York, almost entirely owned by foreign powers who keep it there because it's considered safe.
Someday, I will understand the rants about the Fed. This is not that day. Bagheera (talk) 22:07, 19 March 2008 (UTC)

[edit] Split off criticism section to its own article

Due to the amount of criticism the Federal Reserve receives from both "mainstream" and "fringe" sources, an article specifically on these criticisms appears notable. Also, due to the size of this article, a reduction in the amount of material is needed. Therefore, I propose a split-off of the criticism section to its own article. --EGeek (talk) 06:59, 27 January 2008 (UTC)

I strongly agree that the criticism section should be separated. Dotter (talk) 05:55, 28 January 2008 (UTC)

Definitely keep it here. When someone looks up Federal Reserve they can see everything. If you move it they may miss it. —Preceding unsigned comment added by Wikilyn (talk • contribs) 03:08, 31 January 2008 (UTC)

There would still be a section with a link to the other article. The main purpose here is to shrink this article down to a more manageable size. The Monetary Policy section was my first choice; however, the article it would merge to has some major issues right now, and due to current debates on that page, it is not a good time to add anything else to that article. The second largest section is the criticism section.--EGeek (talk) 06:34, 31 January 2008 (UTC)
I've been wanting to split off most of the "History" section and merge it into History of central banking in the United States for a while now. The section is way too big and foreboding for someone reading about the Fed for the first time, not to mention it makes the article too long and better belongs in the aforementioned article. The section left behind would be a summary and could be two or three concise paragraphs, which I think would improve Federal Reserve System greatly. It looks like a big job, but I think it's doable and a good idea assuming consensus emerges. What does everyone think? -FrankTobia (talk) 13:49, 31 January 2008 (UTC)

In addressing an issue like the Federal Reserve and Monetary Policy, it makes sense to address the "what" AND the "why" questions...it hardly seems appropriate then to separate the "why not" from the "why." Consequently, I support leaving the "Criticisms" section intact within the page. I do however support merging the "History" section into History of central banking in the United States.--llaplue (talk) 01:08, March 21 2008 (Bryan College) —Preceding comment was added at 05:12, 21 March 2008 (UTC)

[edit] Splitting of sections

I think the criticisms of any topic should be left within that topic. Splitting criticisms from a topic almost seems as though you are hiding them.97.100.138.223 (talk) 22:01, 13 February 2008 (UTC)

Normally, I would agree; however, this article has grown so long that it hinders its readability and makes adding additional material difficult. Also, splitting the section does not mean its entirely detected from the parent article. A summary and link to the separate article is left in its place. I have already studied each section (see table below) and found that the "history" and "criticisms" sections are the largest. --EGeek (talk) 06:31, 14 February 2008 (UTC)

I can support the splitting of sections based on the wikipedia guidline of splitting articles that are too long which lead to readability and technical issues. I think separate articles should remain within context of the federal reserve system and the main purpose of splitting them is due to size constraints. The criticism section could maintain this since the title of the separate article is "criticisms of the federal reserve system" but splitting the history and monetary policy sections don't remain within the context of the federal reserve system if they are merged with the currently proposed sections.

For example, I think the "monetary policy of the United States" article should contain information about monetary policies since the beginning of the united states whereas an article titled something like "monetary policy of the federal reserve system" would remain within the context of the federal reserve system specifically and would stay focused on just that aspect. It would then serve as an extension of the "federal reseve system" article that was split due to technical reasons.

Similar reasoning can be used for the splitting of the "history" section. Merging the history of the federal reserve to the "history of central banking in the united states" will stray from focusing on just the federal reserve aspect. An article titled something like "history of the federal reserve system" could be appropriate if it focuses on the years leading up to the federal reserve system like the banking panics of the late 1800s and the panic of 1907 but it would also need the historical changes that the federal reserve system went through since its founding in 1913. A number of laws and acts have been created since its founding and it has evolved since 1913 and I think there is enough information about this to warrant an article separate from "history of central banking in the united states".

So, in summary, as long as they serve the purpose of extending the article to deal with readability/technical issues and the separate articles remain within the context of the federal reserve system specifically, I can support the splitting of sections. Analoguni (talk) 00:43, 1 February 2008 (UTC)

Based on your comments and a review of readability guidelines, I have performed a litmus test to examine the amount of material in each section. I performed this test per described in the readability guide with a few differences. I selected all text from History (after the lead and TOC) to the end of the conspiracy section (right before a list of prominent banking institutions). To prevent mistakes, I included lists and tables and copied the text into a word processor. I then counted the number of pages it would print taking note of pages with lists or tables. No images or formatting were selected. These are the results:
Section No. Pages Contains
History 6 pure text
Purpose 3 list on half of a page
Monetary Policy 5 half lists
The Federal Reserve Banks and the member banks 3 mostly all lists
Legal status and position in government 1 pure text
Federal Reserve balance sheet 2 half tables
Regulation of fractional reserve 2 half tables
Criticisms 6 pure text
Total* 18 62 kB (pure text)
The total uses the exact method as described in the readability guide to provide the most conservative estimate possible. The readability guide suggest to split the article after 10 pages. As showed from the table above, the largest sections are history and critisms. Since one section alone will not reduce the page count below 10, I suggest splitting both of these pages to separate articles leaving a summary and a link to the main article. For now, I will add a split-from box to the history section that will split the section to a new page called History of the Federal Reserve System--EGeek (talk) 03:43, 1 February 2008 (UTC)
Nice job. Based on this it does make sense to split off the history of criticism sections. Analoguni (talk) 06:33, 5 February 2008 (UTC)

Split: Splitting off the criticism section to maintain readability certainly seems warranted. This does NOT mean that there won't still be a Criticism section in the main artice, but rather that the Criticism section should be a summary of the Criticism article.--Aervanath (talk) 08:22, 24 February 2008 (UTC)

Oppose - I would oppose a split in regard to criticism. In fact, I oppose having a criticism section (See e.g., WP:NPOV#Article structure, Wikipedia:Words_to_avoid#Article_structure, Wikipedia:Avoid thread mode, Wikipedia:Pro_&_con_lists, Wikipedia_talk:Pro_&_con_lists, Template:Criticism-section). What I would like to see is the criticism integrated into the other topic areas of the article where appropriate for weight. Once a particular topic area becomes large enough to split, then do so. Morphh (talk) 16:31, 25 May 2008 (UTC)

I agree. Most of the contents of the current criticism section can be integrated into the rest of the article. This would present a more neutral approach to material such as the Federal Reserve's handling of monetary policy prior to the Great Depression, since these critics include both mainstream economist (e.g. Milton Friedman) and current Fed members (e.g. Ben Bernanke). --EGeek (talk) 18:42, 31 May 2008 (UTC)

[edit] Split off history section

Due to the size of this article, a reduction in the amount of material is needed. Therefore, I propose a split-off of the history section to its own article. A summary and link to the article will replace this section after the split. See this discussion in the talk page for more information about this decision. --EGeek (talk) 03:58, 1 February 2008 (UTC)

Very nice, I agree with the splitting-of-sections analysis above. I support splitting the History section off into its own new article, and leaving two or three summary paragraphs behind. Of course the overlap between History of the Federal Reserve System and History of central banking in the United States should be noted: the former is contained entirely within the latter, and is a specific case of it, albeit an important one deserving of its own article. -FrankTobia (talk) 13:42, 1 February 2008 (UTC)
Also agreed, as a reader of the entirety of Wikipedia, this history section in the article would promote me to skip the whole thing. Also agreed with FrankTobia, the article on History of central banking in the United States and its similarity to the history spin off is of importance. —Preceding unsigned comment added by TauntingElf (talk • contribs) 06:48, 14 February 2008 (UTC)
Okay, since nobody has disagreed yet, I have split the history section to History of the Federal Reserve System. I have left a five paragraph summary created by removing most of the details and all of the quotes from the original material. This summary still needs work. I also split the history content in the new article into sections for an easier read. --EGeek (talk) 07:20, 15 February 2008 (UTC)

[edit] Usury

Maybe include in criticism that the interest rate qualifies as usury? In America, there is a limit on the amount of interest a lender can put on a loan. Does this not apply to the money that is loaned to the government itself? I'd like this to be talked about. 69.154.11.73 (talk) 06:26, 2 February 2008 (UTC)

Currently, T-Bill interest rates are around 3% - 4%; does that qualify as usury? 71.214.64.177 (talk) 02:37, 4 February 2008 (UTC)
Whether it is or is not usury is not the point. If there are reliable sources (and I'm sure you can find them) documenting criticism of the Federal Reserve based on the interest rate it charges to the government, then it should absolutely be added in there. However, our job as editors is not to level the criticisms ourselves, but merely to document the criticisms of others. See Wikipedia's No Original Reseach policy.--Aervanath (talk) 03:41, 2 March 2008 (UTC)
Usury, by current usage, is "excessive interest" or "interest in excess of law" when there's laws limiting interest rates in place. While I would certainly consider the 30% interest rates many credit card companies charge their customers "excessive", I'm not sure the Fed rate (currently 2.0%) could count as "excessive" even by the most aggressive standard. Even at the 8.0% we saw in 1990 (the highest rate in nearly 20 years) I'd have a hard time considering it "Usury." You'd have to somehow find documented criticisms (not just our opinions) that justify 2.0% as being Usury - which I doubt you could do. Bagheera (talk) 01:26, 13 May 2008 (UTC)

[edit] Repetition of Information

Holy Shit, I swear every paragraph repeated something that was already explained in a previous paragraph. I don't know if this is a topic already being discussed, but I read the whole thing and it was terrible. I don't know how many different times I was told the Fed is independent in the gov, yet privately and publicly controlled or whatever the hell it was trying to say. This article needs serious revision. —Preceding unsigned comment added by 138.87.186.134 (talk • contribs) on 19 February 2008.

You have to remember that this article, as are almost all articles in Wikipedia, was not written by just one person. If it were written by one person (written well, that is) it would never contain repetition after repetion of the same point. The repetitions are almost certainly the result of a different contributor, who writes without realizing or caring that the same point has previously been made (or will be made again further along in the article). Mamarazzi (talk) 19:22, 11 April 2008 (UTC)
Yes, and the problem with the "Fed is independent" and the "privately and publicly" stuff is that it's virtually "non-fixable" on a long term basis, because of the chronic attacks on the article by people who believe the Fed is "bad" and who believe they can "say it's bad" by "saying it's private." For them, "private" equals "bad" and "public" equals "good" -- at least in the context of the Federal Reserve System.
We have the same problem in other areas of Wikipedia, where people come in and add nonsensical stuff that has been discussed and debunked, in the article talk page, over and over and over for years, and deleted over and over and over for years, and yet it just keeps coming back. It keeps coming back because there is always a new user who "didn't get the memo," or didn't read the memo, or who doesn't care about the memo, so to speak. People will always try to push an agenda, and people will always copy and paste some garbage from somewhere else on the internet.
I don't know how many times I have had to try to explain to new users that the term "the Fed", as shorthand, is used by some people to refer to the entire System, and by others to refer just to The Board of Governors, and by still others to refer just to the twelve regional Banks. That's part of the problem, and of course no one can "fix" it.
I also don't know how many times I have had to explain to people that saying that the Federal Reserve SYSTEM -- the entire system -- is "private" makes about as much sense as saying that "the universe is a planet" merely because the universe contains planets. The fact that the Federal Reserve System contains "private" entities does not make the Federal Reserve System "private," any more than containing "planets" makes the universe "a planet."
Few Wikipedia articles are written precisely the way any one of us would write such an article alone. I have had many of my articles on tax law published (under my real name), and it's so gratifying to be able to publish something on a technical subject and have it be "yours" or "your words" without it being "edited" by someone with virtually no knowledge of the subject. Wikipedia is not the place to be if you want to do that kind of publishing, though. Famspear (talk) 20:37, 11 April 2008 (UTC)

[edit] Ron Paul?

Just checking but is it nescessary to have his name linked everytime it appears in the Criticisms section. I mean Friedman is mentioned several times throughout but is only linked twice, once in Monetary Policy and once in Criticism. Also, does it have to be "Ron Paul" each time? It just feels poorly writen to see his full name every two or three paragraphs, so I have changed the first link to "Rep. Ron Paul" and replaced the others with "Rep. Paul". Correction, I used "Ron Paul" and "Paul" respectively, noting that Congressman was in front of each. Birdman1011395 (talk) 07:26, 19 February 2008 (UTC)

[edit] ownership secret

If the Federal Reserve member banks sell their shares to other banks then should the ownership of the federal reserve be regarded as secret if this sale or other legally effective transfer is not a matter of public record ? Note I am not talking about control which is effected through the board under normal statute.

Also note this quote -->

"because a Federal Reserve Bank is not a publicly traded corporation and is therefore not required by the Securities and Exchange Commission to publish a list of its major shareholders"

from this article http://www.usagold.com/federalreserve.html which is an academic attempt to debunk the questioning of ownership.

—Preceding unsigned comment added by 82.232.191.120 (talk) 22:22, 26 February 2008 (UTC)

Regarding the question about secretly selling shares to another bank: Good question. I believe the article states that shares of stock in Federal Reserve banks are not transferable. If that is correct as a matter of law, then even if a member bank (say, "Joe's National Bank of Austin") tried to secretly "sell" its stock in the Federal Reserve Bank of Dallas to "Bill's National Bank of Houston," the "sale" would have no legal effect -- except perhaps to get Joe's National Bank of Austin into legal trouble (maybe Bill's Bank, too). Famspear (talk) 20:41, 28 February 2008 (UTC)
Federal law (12 U.S.C. 287) prohibits Federal Reserve stockholders to transfer or hypothecate their Federal Reserve stock. Dotter (talk) 01:28, 5 March 2008 (UTC)

[edit] so, how does this work actually?

FED wants to decrease the money supply, so it offers "cheap" money for the banks (e.g. 10% annually) - the banks "buy money" from the FED, because they can get only 5% on the market

when the options are redeemed, the banks have earned 5%

dont they increase the money supply by this 5%? (because they earned some "free money")


and what happens actually when the FED increases the money supply? money is sold to the banks cheaply (e.g. for 5%), when the banks can earn 10% on the market consequently the banks earn 5% and when they operation is redeemed, the FED earns 5% too

where does this FED 5% income go??? Agameofchess (talk) 21:31, 4 March 2008 (UTC)

When the Federal Reserve wants to decrease the money supply they sell securities - member banks receive securities in exchange for money. When the Federal Reserve wants to increase the money supply, they buy securities - member banks receive money in exchange for securities. Any income by the Federal Reserve is given to the Treasury. --EGeek (talk) 04:44, 5 March 2008 (UTC)

[edit] Article should be renamed "Milton Friedman's Views On the Fed"

Just sayin', just about the only views mentioned in the article are those of Milton Friedman, Ron Paul and views on their side of the spectrum. The people who wrote the bulk of the article seem to have a soft spot for libertarian economic policy. Brentt (talk) 12:07, 18 March 2008 (UTC)

Did you mean in the criticism section? Most of the rest of the article comes from the Federal Reserve Banks' websites, or business magazine articles. --EGeek (talk) 05:37, 19 March 2008 (UTC)
Well, so called Austrian economics appears five times as often in the article as Keynesianism. If that isn't bias I don't know what is. At least Friedman isn't a full on crank. Also, the article implies it is surprising that Galbraith would agree with Friedman regarding the Fed and the great depression when in fact Friedman's analysis echos the orthodox Keynesian position on the subject. 24.63.48.198 (talk) 22:46, 1 April 2008 (UTC)

Kind of like letting Krupp industries or any other Businesses like IBM be the sources for what they did during the second world war, or asking Blackwater and Halliburton to tell us what they are doing and how they are organizing their operations in Iraq. So much for credible insights on wikipedia. —Preceding unsigned comment added by 85.112.144.50 (talk) 14:50, 4 April 2008 (UTC)

[edit] More hair-splitting

I made some edits to clarify that each member bank holds stock in one of the twelve regional Federal Reserve banks, not in "the Federal Reserve".

In a strict sense, there is no such thing as "owning stock" in "the Federal Reserve" (in the sense of the Federal Reserve System).

As noted before, the terms "the Fed" and "the Federal Reserve" are sometimes used to refer to the entire system, other times only to the Board of Governors, and still other times only to one or more of the 12 regional FR banks. I think that even the publications of Federal Reserve System use these terms ambiguously or inconsistently.

For example, I think I remember seeing somewhere that "the Federal Reserve System is the central bank." I think that statement would be misleading. The Federal Reserve system is not "a central bank". It's a central banking system. It consists of a government agency called the Board of Governors -- which is not "a bank" at all -- plus twelve regional FR banks (which of course are banks), plus numerous member banks, plus the FOMC, etc. Something that consists of more than one bank - not to mention other thing that aren't banks at all -- cannot be "a bank" or "a central bank" in any meaningful sense.

Because there has been so much confusion that has been engendered by the usage of terminology, I argue that Wikipedia should continue to strive to be very precise in its use of language in this article. Yours, Famspear (talk) 22:19, 27 March 2008 (UTC)

While I agree with your point about owning stock in the Federal Reserve, I don't agree that the terminology for central bank should be changed. The Federal Reserve system acts as a single "group" composed of different legal entities, and reports consolidated balance sheets on a regular basis: [3]. In this sense, the situation is analagous to any banking "group" that is composed of numerous legal entities. It's not incorrect to refer to Citi as a bank, as a banking group, as a financial group, as a bank holding company, depending on the context. In this context, it is the central bank.
In the case of the Fed, even auditors and accountants refer to it as "the nation's Central Bank." See [4]: "Accounting principles for entities with the unique powers and responsibilities of the nation's central bank have not been formulated by various accounting standard-setting bodies."
In other words, it may not be a single legal entity, but it is still a Central Bank (composed of several entities). In this case, I think saying "central banking system" confuses the issue.--Gregalton (talk) 08:22, 28 March 2008 (UTC)
Both calling the Federal Reserve System a "central bank" or a "central banking system" are correct in the right context. Famspear is right about the owning stock issue, but I think he and Gregalton are both right about terminology. It depends on the context, and people can and do refer to the System as a "central bank" or a "central banking system" without being incorrect on either count.
This issue of usage should be addressed within the article, probably in a single paragraph relating to terminology and usage. If it's near the beginning, this will help the reader make sense of the usage/terminology issue. -FrankTobia (talk) 13:38, 28 March 2008 (UTC)
A very reasonable suggestion, thanks.--Gregalton (talk) 13:59, 28 March 2008 (UTC)
To editors FrankTobia and Gregalton - thanks. Famspear (talk) 20:38, 28 March 2008 (UTC)

I think you bring up a good point here. You also make a good point when you note that the official publications also use these terms interchangeably. So, what to do about it? I think putting a second paragraph in the intro explaining the terminology could work, maybe even have the first section be "terminology" or something like that. There may be good sources available with discussions about the terminology. Analoguni (talk) 03:51, 3 April 2008 (UTC)


[edit] Scarily Biased

"Member banks receive a fixed, 6 percent dividend annually on their stock, and they do not control the Fed as a result of owning this stock. They do, however, elect six of the nine members of Reserve Banks’ boards of directors"

The members DONT control the board yet they ELECT the M A J O R I T Y of the members???????? WAKE UP!!!! This article reads like it was written by David Rockefeller WAKE UP PEOPLE!!!! These people are enslaving you!!

"I have to agree that the published main article is very biased and leaves out many pertinent details regarding the current banking system of the US. To call the system a quasi private/government entity is misleading to the general public. To say that the Fed returns any "excess" after expenses to the US Treasury is of little value considering the fact that the FED is not audited, and because it is a privately held corporation that is not required to disclose financial results. In addition the Fed operates under a tax exempt status and thus pays no taxes on the profits it takes from the American People. In layman terms a private company the "FED" controls the financial system of the United States, and the US government appoints some of the Board of Directors and limits the salary caps of the Directors, however the pay for the Board of directors comes from the private entities not from the US government. A more accurate description of the system would be that the Central Bank of the United States is owned by a private entity that is not open to the public. You as an American Citizen can not invest nor participate in the profits of the United States Monetary System. The federal reserves own educational website shows the entities structure with a pyramid that places the American people at the bottom. The United States Postal Service is an example of a government agency, NASA is another the Federal Reserve System is the complete opposite of those two entities and to say quasi-government is a falsehood. The paychecks for every member of the system are paid for by the private sector not the government. There is nothing Quasi governmental about that."

—Preceding unsigned comment added by 66.235.90.2 (talk) 06:31, 27 March 2008 (UTC)

Whether the article is biased or not remains to be seen; the comments above are for the most part demonstrably false:
Fed is audited: Reserve System Audits
Excess after expenses: financial statements of the reserve banks. Net income: $34,195; dividends to member banks, $871; transferred to surplus, 4,272; Payments to U.S. Treasury as interest on Federal Reserve notes $29,052. So the government got about 85% (in 2005 the figures was over 92%), and the Surplus is not the property of the bank-members - Congress decides what to do with that money. (the member banks got only 2.5%).
The rest of the "details" you add are just gibberish and lies, which seems far worse than "bias."--Gregalton (talk) 13:41, 4 April 2008 (UTC)
Gregalton; Did you realize that the figures you quoted from the Federal Reserve "Net Income" page are million dollar figures? (For example: "Net Income: $34,195" refers to $34,195 MILLION dollars. (aka: 34.194 billion)?)   I think this is important simply because it goes to the point of just how complicated this whole subject is. —Preceding unsigned comment added by 67.234.33.63 (talk) 03:18, 10 May 2008 (UTC)
Of course I realised that, seems obvious (if you read the actual source); I don't find that part complicated at all. Probably should have put the millions in, though.--Gregalton (talk) 03:48, 10 May 2008 (UTC)
Dear IP66.235.90.2: I'm sorry, but your comments are almost completely incorrect. This has been hashed out over and over for years now. To call the Federal Reserve System a quasi private/government entity is not only not misleading, it is the very best, most accurate way of describing it. Sorry, but the Fed is not "the opposite" of NASA, etc. The "opposite" would be something that is completely non-governmental.
The Fed is different from NASA or the Postal Service, though. NASA is purely a government agency. The Fed is an amalgamation of both government agencies and private corporations. The Federal Reserve System is not "a private corporation." It's not "a corporation" at all. The statement that the Fed is a "corporation" or "a private corporation" is blatantly false. Please re-read the article.
Again, the Fed is a central banking system that consists of some things that are corporations and other things that are not corporations. For example, the Board of Governors is not a "corporation." The Federal Open Market Committee is not a "corporation."
The chronic ranting on this talk page about the "privateness" of the Federal Reserve System is based on a train of pseudo-logic that often goes something like this:
"Money should not be controlled by evil private bankers. Money should be controlled by government. Federal Reserve System is not government. Federal Reserve System is private. Federal Reserve System is controlled by evil private bankers. Therefore, Federal Reserve System bad."
The problem with the ranting is that it is factually incorrect. More to the point, Wikipedia articles and Wikipedia talk pages are not the proper place to debate the goodness or badness of the Federal Reserve System. The purpose of this talk page is to discuss ways to improve the article.
I suggest that you look for a specific statement in the article that is factually incorrect, or improperly sourced, or improperly biased, or that is based on impermissible synthesis of sources. And avoid factually incorrect rhetoric. Famspear (talk) 14:33, 4 April 2008 (UTC)
Oh, and statements like this:
"WAKE UP!!!! This article reads like it was written by David Rockefeller WAKE UP PEOPLE!!!! These people are enslaving you!!"
--are probably not going to get you very far in Wikipedia. Forget about the goodness or badness of the Federal Reserve System, and concentrate on Wikipedia policies and guidelines. Famspear (talk) 14:36, 4 April 2008 (UTC)

[edit] Nonsense edit on "enough states"

I removed the following nonsense edit:

"The Federal Reserve Act was not passed by enough states therefore making it an illegal organization.

The "Federal Reserve Act" is of course a U.S. federal statute. Federal statutes are not "passed by states." Federal statutes are passed by the U.S. Congress, which is composed of the U.S. House of Representatives and the U.S. Senate, and (usually) signed into law by the President, etc. The "states" are not even involved in the passage of federal statutes. Therefore, to say that the Act was "not passed by enough states" is nonsensical. The statement that the Federal Reserve Act is an "illegal organization" is even more nonsensical. Famspear (talk) 16:23, 11 April 2008 (UTC)

[edit] FED assets consist of ca. 45% mortgage backed securities!

The section Balance Sheet shows a balance as of June 21, 2007 , which states that out of total assets $ 870,868 Mio , $ 790,439 Mio consist of U.S. Treasury-Bills, -Notes and -Bonds. However since then, the FED exchanged ca. $ 400 Billion US-Treasuries against mortgage backed securities (the toxic stuff no bank (other than the FED) wants to lend against ! ).

So, Wikipedia pretents a FED balance sheet (and by implication a backing of the US-Dollar ) which is no more!

I wonder if americans understand that their US-Dollar is now backed to ca. 45 % by mortgage backed securities ?!! 79.210.97.38 (talk) 18:39, 1 May 2008 (UTC)

Perhaps a link to the figures you're claiming?--Gregalton (talk) 16:57, 3 May 2008 (UTC)
Certainly :
Under : hxxp://www.federalreserve.gov/newsevents/press/monetary/2008monetary.htm you will find e.g. :
(May 2, 2008) hxxp://www.federalreserve.gov/newsevents/press/monetary/20080502a.htm that the Term Auction Facility (TAF) will be increased to $150 billion outstanding amounts. (there are earlier press releases regarding the TAF with smaller amounts)
(March 7, 2008) hxxp://www.federalreserve.gov/newsevents/press/monetary/20080307a.htm that repurchase (RP) agreements with primary dealers expected to cumulate to $100 billion will be initiated.
(March 11, 2008) hxxp://www.federalreserve.gov/newsevents/press/monetary/20080311a.htm that a Term Securities Lending Facility (TSLF) will be established which will lend up to $200 billion.
and (March 16, 2008) hxxp://www.federalreserve.gov/newsevents/press/monetary/20080316a.htm that the Federal Reserve Bank of New York was authorized to create a lending facility (of unknown billion $) to primary dealers (to provide financing to participants in securitization markets).
So, here you have FED references for more than $450 billion .
Under : hxxp://www.federalreserve.gov/releases/ , e.g. - Factors Affecting Reserve Balances - H.4.1 hxxp://www.federalreserve.gov/releases/h41/Current/ you will find under 2. Consolidated Statement of Condition of All Federal Reserve Banks that the FEDs total assets were $889 billion , as of April 30, 2008.
A last thought : When you go through these press releases and read the description of the colateral the FED demands, keep in mind that CDOs consisting of ca. 80% of no-doc-loans (so called lier-loans) were AAA-rated by SAP !! (I will provide a link for that statement in the future, but give me a few weeks to dig it out of some material; for now it`s just my recollection.).
And also from the May 2, 2008 release, that the FED now lowers the quality of some of the colateral it demands.79.210.79.93 (talk) 19:25, 3 May 2008 (UTC)
I would suggest that it would be better to look at the Fed balance sheet directly - what may actually transpire could be quite different. Thanks for the links though.--Gregalton (talk) 21:39, 3 May 2008 (UTC)
I don`t understand your answer !!
The link I gave above (hxxp://www.federalreserve.gov/releases/h41/Current/ you will find under 2. Consolidated Statement of Condition of All Federal Reserve Banks) is exactly the link Wikipedia uses itself for the FED balance sheet !!!!!!! (see Wikipedia, Federal Reserve System section Balance sheet : "Consolidated Statement of Condition of All Federal Reserve Banks" and reference [75] )
Please explain your comment ! 79.210.82.133 (talk) 00:58, 4 May 2008 (UTC)
I'm saying that you've added up numbers from press releases and come to the conclusion that "the Fed exchanged $400 bln treasuries for other assets" and that this means half the balance sheet is made up of other assets. If you look at the actual balance sheet, that does not appear to be the case. I get approximately $140 bln on the balance sheet of currency collateralized by non-treasury, non-agency, so the amount is considerably less (as of April 30).--Gregalton (talk) 16:16, 5 May 2008 (UTC)

Hi Gregalton, thanks for your answer, and oh, I see your point now. It`s not reflected in the FEDs Balance sheet. Exactly, and that would worry me some (have I just heaed someone just saiy "Enron" ? Nahh... Can not be.)

However, the simple fact is (I may be wrong, and please correct me) : a) as of e.g. Dec 26, 2007 the FED had ca. $754 billion Treasuries. b) as of now (May 2008) the FED has loaned out more than $450 billion Treasuries. Where do these loaned Treasuries come from ? If the FED does not have a hidden stash of Treasuries, not shown on it`s balance sheet, then they neccessarily must come out of the Treasuries shown on the FED balance sheet (i.e. the ca. $754 billion) .

That`s what brings me to the understanding, that the US-Dollar is now backed to ca. 50% by "private and illiquid obligations of Wall Street" .

But you are right, it`s not explicitly shown on the FED balance sheet. But still, they must come from somewhere! (My suspicion is that they don`t put it on the balance sheet because of it`s supposed "temporary nature", i.e. 28 days, rolled over for "as long as necessary", not because the explicit figures would look ugly. They also discontinued M3, because it does not contain additional information, not because the current M3 figures would look ugly, right?).

May I offer two links substantiating that : a) hxxttp://www.bloomberg.com/apps/news?pid=20601068&sid=a8JhRTZjidh8 , "...The Fed has committed as much as 60 percent of the $709 billion in Treasury securities on its balance sheet to providing liquidity...". b) from a blog, but still info-taining : hxxp://bp2.blogger.com/_H2DePAZe2gA/R-Ms3GD1FAI/AAAAAAAABGs/03kuCqh5NN4/s1600-h/Ben%27s+Wallet.PNG or hxxp://jessescrossroadscafe.blogspot.com/2008/03/hey-ben-whats-in-your-wallet.html respectively. Cheers from Germany, Werner. 79.210.109.64 (talk) 16:23, 6 May 2008 (UTC)

It may be your point b) that is simply incorrect: if I read the docs correctly, the Fed announced (in separate programs) that it would accept/loan out UP TO certain amounts. This does not mean they DID loan out/accept up to those maximums. Since Bagehot's central banking dictum holds (paraphrased) that the central bank should lend unlimited amounts, but at punitive rates, making use of those limits for banks may be expensive. This could easily explain the difference. That said, I'm not an expert at reading the Fed's balance sheets, so I may be missing something (but I've read a lot of balance sheets). My point is that you can't go from press release "a" to "b" automatically; an individual might have a credit line that they don't use, and that doesn't mean the bank that granted the credit line has actually lent the full amount of the credit line.--Gregalton (talk) 16:48, 6 May 2008 (UTC)
Hi Gregalton, that was a fast answer.
As you can see under hxxp://www.federalreserve.gov/newsevents/press/monetary/2008monetary.htm , there are always two press releases per auction : a) one that announces the auction including terms and amount offered, and b) on the day after the auction announcing the results including total propositions submitted and total propositions accepted.
I did (one time only) carefully go through all the releases from January 2, 2008 through May 2, 2008 May, just because I wanted to find out what was really going on in terms of amounts newly lent vs. rolled over at these auctions. (I was confused by the lots of individual reportings (on news and blogs) and thus went once through all these FED-press-releases to get the overall picture. I also plotted these figures in a spread-sheet to check that e.g. the TAF always stayed within its announced (for that timeframe) limits, etc.). It turns out that these FED-press-releases provide a logical and concise picture; and yes, they lead to the figures I mentioned. I may be wrong, but this is my honest conviction. And given the severity of that message (assuming it really is correct), I think there is an obligation of Wikipedia to put it into the public space; That`s why I brought this up. Werner.79.210.71.100 (talk) 18:23, 6 May 2008 (UTC)
I apologize, it seems that you have done considerably more research than I first realized. If you can find reliable sources making the point that you are making, then of course do so. I would be cautious about making points based on press release to balance sheet deductions, however - it would probably be considered a form of original research like synthesis.
And if you are new to WP, welcome, and I think you would find having a user name (just login) useful and productive.--Gregalton (talk) 00:40, 7 May 2008 (UTC)
Hi Gregalton, thanks for your kind answer. Since scrutiny is a vital part of discovering the truth, there is no need to apologize, and your questions are quite wellcome!
Yes, I agree that finding appropriate "reliable sources" is the next step. I will try so, but suspecting that the MSM may largly have shunned this aspect, please do not count on me to be successful. (and, maybe I am not so sure that the portrayal of the US-Dollar and the FEDs reserves should rest on the shoulders of a german, (nice way to weasel out ??)). No, seriously, I will give it a try and report back here (in a week at latest). (and I remember to owe another reference; about SAPs AAA-rating of "liar loans")
As for the user name, I will think about it, maybe later. Cheers from Germany, Werner.79.210.71.110 (talk) 11:13, 7 May 2008 (UTC)

I think the sources above should suffice. I've highlighted some of the important parts and added some other info that I think will be useful. Analoguni (talk) 05:22, 9 May 2008 (UTC)

Let's start with the most official source, which is the Fed itself:
In the press release on March 11, 2008 announcing the creation of the term securities lending facility, this taking on of mortgage debt is explicitly stated:

Under this new Term Securities Lending Facility (TSLF), the Federal Reserve will lend up to $200 billion of Treasury securities to primary dealers secured for a term of 28 days (rather than overnight, as in the existing program) by a pledge of other securities, including federal agency debt, federal agency residential-mortgage-backed securities (MBS), and non-agency AAA/Aaa-rated private-label residential MBS. The TSLF is intended to promote liquidity in the financing markets for Treasury and other collateral and thus to foster the functioning of financial markets more generally.

source: http://www.federalreserve.gov/newsevents/press/monetary/20080311a.htm (this source is also listed above)
It is also explicitly stated in a press release on May 2, 2008 announcing an increase in the funds available in the newly created facilities:

the Federal Open Market Committee authorized an expansion of the collateral that can be pledged in the Federal Reserve's Schedule 2 Term Securities Lending Facility (TSLF) auctions. Primary dealers may now pledge AAA/Aaa-rated asset-backed securities, in addition to already eligible residential- and commercial-mortgage-backed securities and agency collateralized mortgage obligations, beginning with the Schedule 2 TSLF auction to be announced on May 7, 2008, and to settle on May 9, 2008. The wider pool of collateral should promote improved financing conditions in a broader range of financial markets. Treasury securities, agency securities, and agency mortgage-backed securities continue to be eligible as collateral in Schedule 1 TSLF auctions.

source: http://www.federalreserve.gov/newsevents/press/monetary/20080502a.htm (this source is also listed above)
The bloomberg article linked above also explicitly states what the policy is:

The Fed has committed as much as 60 percent of the $709 billion in Treasury securities on its balance sheet to providing liquidity and opened the door to more with yesterday's decision to become a lender of last resort for the biggest Wall Street dealers..."They're using up their ammunition on the liquidity and overnight interest-rate fronts," said Lou Crandall, chief economist at Jersey City, New Jersey-based Wrightson ICAP LLC, a unit of ICAP Plc, the world's largest broker for banks and other financial institutions..."There's a limit to how much the Fed can do," said Brian Sack, a former Fed research manager, and now senior economist at Macroeconomic Advisers LLC in Washington. They've been incredibly aggressive with their balance-sheet policies over the past several weeks, and that has very quickly put this capacity issue in play....The Fed may also decide as early as tomorrow to start outright purchases of mortgage-backed securities, said Vincent Reinhart, former director of the Fed's monetary-affairs decision. Some investors have been clamoring for the Fed to make such a move, and the recent measures fell short of that step...The Fed's other programs include as much as $200 billion in lending of Treasuries to primary dealers in exchange for debt that includes mortgage-backed securities, announced March 11 and provisionally set to begin March 27

source: http://www.bloomberg.com/apps/news?pid=20601068&sid=a8JhRTZjidh8
Another bloomberg article also states this:

The U.S. currency plunged yesterday against the euro, yen and Swiss franc, erasing a rally from March 11 when the Fed said it would lend Treasuries to financial institutions and take mortgage debt as collateral.

source: http://www.bloomberg.com/apps/news?pid=20601087&sid=aWK9fKuKM0_A&refer=home
A CNN article also describes this:

The program will lend up to $200 billion of Treasurys to primary dealers, a group of 20 big investment firms, for a 28-day term. The firms can put up as collateral mortgage-backed securities issued by Fannie Mae and Freddie Mac, which generally are seen as safe because of an implicit government guarantee. But in an unusual move, AAA-rated mortgage securities issued by banks will also be accepted. Many investors have shied away from these mortgage-backed securities because they fear defaults in the underlying assets will erode the value.

source: http://money.cnn.com/2008/03/11/news/economy/fedauction/index.htm?postversion=2008031115
The Fed's discount window website has a page that descibes discount window collateral:
The Federal Reserve System Guide to Discount Window Collateral: http://www.frbdiscountwindow.org/frscollateralguide.cfm?hdrID=21&dtlID=81
It's interesting to see what is in the unacceptable types of assets section:

It will not accept assets that: (1) are subject to adverse regulatory classification; (2) are 30 days or more past due (60 days for mortgage notes and other consumer debt, including student loans); (3) are illegal investments for the pledging institution; or that (4) exhibit collateral and credit documentation deficiencies.

And then there is the "Legal Tender FAQ" from the US Treasury which explains where the US dollar gets its value:

Congress has specified that a Federal Reserve Bank must hold collateral equal in value to the Federal Reserve notes that the Bank receives. This collateral is chiefly gold certificates and United States securities. This provides backing for the note issue. The idea was that if the Congress dissolved the Federal Reserve System, the United States would take over the notes (liabilities). This would meet the requirements of Section 411, but the government would also take over the assets, which would be of equal value. Federal Reserve notes represent a first lien on all the assets of the Federal Reserve Banks, and on the collateral specifically held against them. Federal Reserve notes are not redeemable in gold, silver or any other commodity, and receive no backing by anything This has been the case since 1933. The notes have no value for themselves, but for what they will buy. In another sense, because they are legal tender, Federal Reserve notes are "backed" by all the goods and services in the economy.

source: http://www.treas.gov/education/faq/currency/legal-tender.shtml Analoguni (talk) 05:03, 9 May 2008 (UTC)

Hi, Analoguni; thanks for your work, excellent!

So, I guess I see two points here :
a) It is true that FEDs balance sheet as of June 21, 2007 shown in the Wiki-article is outdated insofar that ca.50% of the $790 billion U.S. Treasuries have been lent against "private and illiquid obligations of Wall Street" as colateral. So, this simply may need some updating. (and thanks for pointing out, that the calateral now (partially) includes consumer debt, including student loans. Btw. for what it`s worth, the other day someone on a blog inquired about "boat loans".)
b) It is not true that the US-Dollar is now backed to ca. 50% by these "private and illiquid obligations of Wall Street" ; it`s even worse : "Federal Reserve notes are not redeemable in gold, silver or any other commodity, and receive no backing by anything." (from your "Legal Tender FAQ" from the US Treasury reference). No backing by anything, not even "private and illiquid obligations of Wall Street".
I did not realize that. I assumed that after the termination of the gold-standard, the assets of the FED (and thereby mainly these treasuries now lent out) would constitute the backing of the US-Dollar. (appearently, the FED-reserves serve only a backing available to the government; though I have to confess I am still somewhat confused about that point.)
So, in order to prevent other people from that fallacy, maybe this info should be clearly/conspicuously posted with the updated FED balance sheet (these assets/reserves do not back-up the dollar) as well as in the "US-Dollar" article (the US-Dollar receives no backing by anything)
What`s your opinion ? Werner.79.210.97.46 (talk) 17:39, 9 May 2008 (UTC)
Here is a pretty impeccable [source] you can use in this area. I don't think you can assume that what's remaining is 45% mortgage backed securities, and it would be necessary to distinguish agency vs regular MBS, but some of what we've been referring to is covered here. Best.--Gregalton (talk) 20:39, 13 May 2008 (UTC)

I've created a chart showing the asset side of the Fed balance sheet. You can see how much of the treasuries the Fed lent out over the past few months plus some other new lending trends. It is clear that an unusual amount of treasuries has been lent out, but I don't know how much of them are collateralized with mortgage backed securities. What is certain, however, is the amount of treasuries lent out, which is (in millions of dollars):

790,820-536,714 = 254,106

This number is calculated using the highest value for "Securities held outright" and the current value. To get the percentage of total Fed assets, just use the latest balance sheet:

254,106/889,621 = 0.2856 = 28.56%.

So from just this, AT MOST, 28.56% of Fed assets consist of mortgage backed securities. The reason I say AT MOST is because I think it's possible that some of the treasuries have been lent out with other assets being used as collateral other than mortgages. However, there are also other things going on in the balance sheet. Just look at the term auction credt, repurchase agreements, and other loans. I don't know for sure what these funds have been invested in. Anyway, here is the chart for the asset side of the Fed balance sheet. It's pretty interesting:

Image:Components_of_Asset_Side_of_the_Federal_Reserve_System_Balance_Sheet.gif

Click on the image to see the source data. I've also added this image to the main article. Analoguni (talk) 09:25, 14 May 2008 (UTC)

Thanks - good stuff. I agree very interesting, and although I haven't checked your numbers, I agree the "at most" distinction is important. Two other points that I don't know the answers to:
i) Much of the MBS may be "Agency", meaning Fannie, Freddie, Ginnie Mac, and other (mostly fannie and freddie) - while these may be MBS, they are different beasts with different risks (that most feel are implicitly guaranteed by the Federal govt - like Treasuries);
ii) I believe there are rules on "haircuts" for most of these "other" assets. So the mechanics might be that an MBS has a par value of $100, market value of $90, and a haircut imposed of 10% - meaning that approximately $81 in Treasuries could be borrowed against security with a face value of $100. There are probably also arrangements for the borrower to have margin calls (obligation to put up additional security) if, for example, market value dropped below some figure (like $85). So the Fed might have loaned out $250 mln of Treasuries against, say, $300 mln of other securities - just like other banks might lend to a company based on the value of their assets after a haircut.
Of course, if the borrower goes bankrupt, full recovery may be impossible, but this is not the same thing as saying that if the value of the securities (collateral) drops to $200 mln that the Fed loses $50 mln. The Fed's losses should be zero if none of the borrowers goes under - unlike no-recourse mortgage lending in some jurisdictions, I believe the Fed's counterparties cannot "walk away" (to use mortgage terminology).
So while more risky than the usual Fed procedures, it does not necessarily support the more hysterical conclusions about the Fed's balance sheet being composed of "subprime assets", etc.--Gregalton (talk) 10:22, 14 May 2008 (UTC)
Follow-up: I saw one note in a blog that claimed the amount "repo-able" may be more than market price in some cases, which raises questions, but no confirmation. This does not, however, obviate the point that the repo remains an obligation of the borrower.--Gregalton (talk) 15:22, 14 May 2008 (UTC)

Hi guys, I am still reeling from the shock to learn that the US Dollae is "receives no backing by anything." (from the "Legal Tender FAQ" from Analoguni`s US Treasury reference).

So, the FED press releases are wrong ? No Analoguni, no mystery here : You are looking in the rearview mirror (done and booked), I was forward looking (announcements in the press releases). So, just be a little patient.

a) the Term Auction Facility was increased from amount outstanding $100 billion to $150 billion (press release May, 2). So your column "Term auction credit" as of May, 8 is $125 billion and will go May, 22 to $150 billion.

b) beginning March 7, the Federal Reserve initiated a series of term repurchase transactions that are expected to cumulate to $100 billion. These transactions are conducted as 28-day term repurchase (RP) agreements (press release March, 7). I looks like this is reflected in the column "Repurchase agreements". This would mean an increase from $52,250 billiom (pre March 7) to $152 billion (don`t know how fast) and the $130 billion as of May 8 is part of that.

c) Big question here: Where is the Term Securities Lending Facility (TSLF), (announced press release March 11) where the Federal Reserve will lend up to $200 billion of Treasury securities through weekly auctions beginning March 27 ? Was that an empty FED-announcement ? So, we are missing here a cool $200 billion.

Btw, this is the equivalent chart in the blogosphere : hxxp://bp3.blogger.com/_pMscxxELHEg/SCnn8FVo_9I/AAAAAAAAB-Y/zDqlmohzm2U/s1600-h/FedsBalanceSheet.jpg from hxxp://calculatedrisk.blogspot.com/2008/05/non-borrowed-reserves-and-feds-balance.html . And there you have as of April 30 : a) Term auction (credit) facility $100 billion. (will go May, 8 to $125 billion and May, 22 to $150 billion.) b) Repurchase Agreements $107 billion. (will go ??? to $152 billion.) and here you see c) Term Securities Lending Facility $145 billion. (will eventually reach $200 billion)

So, the blogs show the Term Securities Lending Facility ($145 billion), as announced by the has FED it March 11 (eventually $200 billion), and you do not show it at all !! Why?? (Don`t ask me, I can not read a balance sheet but I can read an press announcement.)

Gregalton, face it : the stuff the FED takes as colateral is the stuff no one other than the FED is willing to lend against !! Werner 79.210.65.245 (talk) 23:03, 15 May 2008 (UTC)

Thanks for the info and the links. The latest release of the Fed balance sheet just came out today and it does confirm what you said about the term auction credit going up to 125 billion: http://www.federalreserve.gov/releases/h41/Current/ I think I can see why the chart I made and the one you linked are different. I used section 2 of the statistical release because it has titles like "assets" and "liabilities" (which I figured made sense since this is a discussion about the balance sheet). However, it looks like section 1 was used (at least in part) by the person who made that other chart. In the other chart, the bottom value is "securities held outright" (just as mine) but "securities to dealers" is subtracted from that in order to get the final amount, which is what has it drop below $400 billion. The "securities lent to dealers" amount is in the part of section 1 titled, "Memo (off-balance-sheet items)". This is interesting stuff. Analoguni (talk) 03:25, 16 May 2008 (UTC)
TAF has pretty much stayed at its limit since it started; however, the other two new facilities have gradually fallen from their peaks. The TSLF account has been declining from a peak of $155 billion on the April 24 statement to a current value of $138 billion on the May 15 statement (see off "term facility" in "off balance sheet items" under the balance sheet. The "primary dealer credit facility" has been declining from a peak of $38 billion on the April 3 statement to a current value of $16 billion on the may 15 statement. The April 3 statement also includes an introduction regarding the effects of TSLF. --EGeek (talk) 07:17, 16 May 2008 (UTC)
Thanks EGeek for your exlpanation and links : your numbers look right! Add to them the $107 billion from the term repurchase (RP) agreements (you didn`t mention)and you have hxxp://bp3.blogger.com/_pMscxxELHEg/SCnn8FVo_9I/AAAAAAAAB-Y/zDqlmohzm2U/s1600-h/FedsBalanceSheet.jpg
So, the bloggers had it right all along and Wikipedia needs to get up to speed ! Werner 79.210.121.67 (talk) 20:07, 16 May 2008 (UTC)
Um, Wikipedia is not suppose to be up-to-date with the latest information. It actually should be the last place with new information. Second, the asset breakdowns may actually violate original material since it is a synthesis of the balance sheet source. Finally, the purpose of my explanations and links were to illustrate that the new facilities affects on the Federal Reserve's assets are still in flux; thus, it is too soon to know what kind of affect these facilities have on those assets. --EGeek (talk) 05:07, 19 May 2008 (UTC)
I've updated the image to contain the data released yesterday (5/15/08). I'm still using the same sources for now (it's easier to add the new values than to go through all the data again to get values for the TSLF and other stats). This chart is improved a little bit so that the amount of gold is easier to see and the y-axis values are easier to see. Analoguni (talk) 01:45, 17 May 2008 (UTC)

I updated the data in the balance sheet. I also added the "off-balance-sheet items" data. Analoguni (talk) 03:04, 17 May 2008 (UTC)

That last edit you made moved the text to the right of the table instead of below on wide screen moniters. --EGeek (talk) 04:29, 19 May 2008 (UTC)
I think it's fixed now. I "cheated" by moving the chart directly under the balance sheet tables. Analoguni (talk) 02:30, 28 May 2008 (UTC)

[edit] why is it 'quasi public'

Why is it a quasi-public (part private, part government) central state.

It is a private bank (it has owners like the Citibank) with some minor 'state influence'. Even if you would say its part private, part and government owned you can´t follow for that statement that it is 'quasi public'. —Preceding unsigned comment added by 77.2.35.33 (talk) 17:24, 3 May 2008 (UTC)

The "quasi-public" distinction, which is explicitly cited, derives from a money and banking textbook written by Frederic Mishkin (a member of the Board of Governors of the Federal Reserve System). See the citation for more details. The Federal Reserve System is not public per se, but it is sort of public. Hence the distinction. -FrankTobia (talk) 18:20, 3 May 2008 (UTC)
Is there any information that can be added which approximately describes the proportion of private and public ownership of the Federal Reserve? --Zven (talk) 01:10, 4 May 2008 (UTC)

Dear Zven: Please review the article. Since the term "Federal Reserve System" does not really describe something that can be "owned" in the sense I think you mean it, there is no "ownership" (public, private or otherwise) of the Federal Reserve System. There is "ownership" of the Federal Reserve Banks, and there is ownership of the member banks.

First, on the member banks (like Wells Fargo, or Citibank, or the local bank down the street), the ownership records of banks are basically private, so it would be difficult to determine whether "governments" own any shares in any of the banks.

Second, regarding the twelve Federal Reserve Banks -- that would be a bit easier to determine. Each of the 12 banks is essentially owned by the member banks in its region. A list of the member banks that own each of the 12 Federal Reserve Banks might be available on the internet; I don't know.

The key point is that there is no such thing as ownership of the Federal Reserve System; you cannot have ownership of something that is not subject to being owned. You can only talk about ownership of the parts of the system that actually happen to be banks, which of course can be owned, and are owned. Famspear (talk) 02:02, 4 May 2008 (UTC)

Agreed, you can't own a system. This question was raised by someone else, what I am inquiring about is what proportion of public and private influence or decision making controls the Federal Reserve? --Zven (talk) 14:14, 5 May 2008 (UTC)

Dear Zven: OK, I see what you're asking. I have one or two college textbooks at home; maybe I can find something on that. Yours, Famspear (talk) 14:20, 5 May 2008 (UTC)

Zven, long story short, the System was designed to be completely decentralized so as to be more palatable to the American public. That said, the board of governors is in charge, with the Chairman pretty much running the show. You're absolutely right that this discussion needs to be in the article. I have a money and banking textbook I've been using to source things; if I find the time within the next week I'll try and add something. -FrankTobia (talk) 14:43, 5 May 2008 (UTC)

[edit] Excessive citation flags

I've removed several of the citation flags in the balance sheet section. Most of these points are covered elsewhere in this article and in annual audited financial statements. If there is a real question, then please re-flag, but I don't see why every single one of the points there should be flagged when addressed elsewhere - it's a scattershot approach.--Gregalton (talk) 15:29, 14 May 2008 (UTC)

[edit] Wikipedia is afraid of the oligopoly?

This article appears to be hugely censored, it makes no obvious mention of private ownership of the FED. 82.131.210.162 (talk) 16:31, 21 May 2008 (UTC)

The article accurately describes it as a quasi-public system. Dotter (talk) 08:21, 25 May 2008 (UTC)
This thread is associated with the previous topic above why is it 'quasi public' --Zven (talk) 11:02, 25 May 2008 (UTC)

This point has been discussed here over and over and over and over and over again. There is virtually nothing new that can be said about this. Please read this talk page in detail.

There is no such thing as "private ownership of the FED." It's a meaningless phrase. As stated over and over and over again, "the Fed" is not something that can be "owned." The Fed consists of both governmental entities and "private" entities. Some of the private entities are indeed "owned" -- and that point is already clearly covered in the article.

Saying that the Fed is a private institution merely because it contains some parts that are private is like saying that "the universe is a planet merely because the universe contains some things that are planets."

The article accurate describes "the Fed" as quasi-public, etc. Famspear (talk) 11:41, 25 May 2008 (UTC)

If this specific topic has been discussed "over and over" in the past, it may represent some confusion about this topic in the article itself. "Quasi-public" is not a word that most people understand, nor does the article appropriately define it. In addition the phrase: "part-public, part-private" is too vague. To most readers this could be misunderstood as partly owned by the public sector, and partly owned by the private sector; however, the direct quote in the structure section explains the system as "an independent entity... having both public purposes and private aspects". Later I will take a stab at paraphrasing this direct quote and provide an inter-article link from the lead in an effort to resolve this ongoing issue.--EGeek (talk) 19:20, 31 May 2008 (UTC)
I agree with EGeek that "part-public, part-private" should be qualified in the article. I included that term in the lead section, appropriately cited, because I think it makes explicit the vagueness of the ownership of the Fed. That said, it should definitely be discussed at greater length within the article. Thanks for your continued help getting to the bottom of this. -FrankTobia (talk) 20:16, 31 May 2008 (UTC)