Money and the Federal Reserve System: Myth and Reality

The United States, like virtually all advanced nations, has a banking system in which the use of fractional reserves means that most money is generated by banks and not the government. Presiding over this system is a central bank. The central bank for the United States, the Federal Reserve, has considerable independence in its operations, which include monetary policy.

This independence -- and the enormous influence that the Federal Reserve has over economic conditions -- have given rise to a great deal of conjecture concerning its nature and operations. The theories and suspicions about the system underlie monetary reform proposals frequently advanced by citizens, as well as various complaints and petitions sent to the Members of Congress because of congressional responsibility for the country's money.

The Federal Reserve is not a private corporation. It is part private and part public, with the Board of Governors an agency of the United States government. The regional Federal Reserve Banks are private corporations acting as agents of the government, owned by their member banks. No individuals hold stock in the Fed. Corporate control of the regional Federal Reserve Banks is limited and based on one vote per stockholding bank (so that big banks cannot control the system). [...]

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