The Federal Reserve as a private corporation

I wanted to open a discussion on one little issue, to counter a meme that's been going around and seems to be popular with Ron Paul supporters. I'm not sure how popular it is ... I'm rather new to this group, but I have heard it repeated a few times, so I thought it worth talking about.

The point is regarding the fact that the Federal Reserve is a private corporation, with publicly-owned banks (that is, private banks), as shareholders. RP supporters and others bring this up in an almost-conspiratorial tone, and suggest this is why the Federal Reserve is bad, or evil.

Well, as a trained economist (educated in the "Austrian School of Economics" that Ron Paul himself always cites), I find this emphasis on the Federal Reserve a bit misguided, and I think it reduces our movement's credibility, so I wanted to correct a few perceptions.

First, on why the Federal Reserve is bad: yes, it is. That's because it practices fractional reserve banking, with no backing of its money. Our nation and its economy would be better off with a currency that has some backing - it need not be gold or silver (a broad basket of commodities might work better), and we'd also be better off it competing currencies were legal. It was a shame that the offices of the Liberty Dollar were raided recently; we should be able to trade with whatever goods or currencies that we want, and may the currency maker with the best reputation win.

But, about this private corporation conspiracy. Well, indeed the Federal Reserve is public/private affair - it is not a branch or department of our federal government, and yes it is set up as a private corporation, with private shareholders. But, these are not your normal shareholders, and this is not your normal profit-sharing, privately controlled corporation.

Why, may you ask, is the Federal Reserve set up this way, and not as a branch of government? Well, there's a simple answer to this, beyond even separation-of-control concerns: there is no Constitutional authority for a central bank! There's no mention in the Constitution about a Central Bank, or government-owned bank - only the power to coin money and regulate its value. Congress in the past hasn't always been willy-nilly with the Constitution, and in fact had great respect for it, so when the (perceived) need for a central bank came up, the public/private set-up of the Federal Reserve was the only way they could do it constitutionally.

The Federal Reserve is a creature of statute, and ultimately is under the control of Congress, with its appointment of a Board of Governors and other statutes and regulations. The "shareholders" in the Reserve are required to be shareholders by statute, and they exert no more control than any other private corporation has over our government (through lobbying and typical influence). The shareholders can't trade their shares in the Federal Reserve, can't use it as collateral, and don't share in the profits, except for a minimal dividend.

The Federal Reserve is a private corporation not by conspiracy, but by statute. It's still not a system that's good for our economy, but let's give ourselves some credibility - drop the conspiracy rhetoric.

... and so your position is that "history", as it is written is mostly "conspiracy rhetoric" as well?

http://www.modernhist...

... just curious!

... and so your position is that "history", as it is written is mostly "conspiracy rhetoric" as well?

... just curious!

Some history write-ups are written more conspiratorially than others, but I don't think it requires conspiracies to explain most historical events. The Illuminati Trilogy is a great read, but it's fiction. There are real Illuminati players, perhaps, but they didn't make the Civil War happen, didn't drive the whole Russian Revolution, etc.,etc. We're not all puppets on a string.

On the other hand, there is a lot of private gain to be made from public policy, and of course you'll find benefactors trying their hand wherever they can, tugging and pushing on policy decisions along with everyone else in the influence game. To that end, yes, the Rothschilds had a significant amount of money to be made from fractional reserve banking, and I'm sure had a hand in the foundation of the Federal Reserve.

Just my thoughts.