Study: Most Americans Don’t Realize Federal Banks Are Not Solely Owned by the Government

Most Americans may have the general sense that federal entities have some impact on their money, as they surely notice when taxes are withheld from their paycheck. Findings from our recent report, the Perceptions and Understanding of Money — 2020 indicate that knowledge of the U.S. national banking system often does not go much deeper than the “general sense” stage.

The average consumer is lacking an understanding of the Federal Reserve in particular, despite it being arguably the most important institution in American economics.

Our study found that 54% of respondents believe the government owns the Federal Reserve network, which is not technically true. 22% of respondents confessed not knowing who owns federal reserve banks, while 16% believe that a state-corporate partnership owns the Federal Reserve System (hyper-realists, perhaps?).

7% of respondents cited corporations as the owners of the Federal Reserve. Assuming that those who believe corporations or a corporate-state partnership own the Fed are not simply exercising a healthy cynicism, it seems clear that most Americans could use some clarity on who, exactly, lords over the Federal Reserve.

Those who don’t have a clear understanding of who owns the Federal Reserve (the “Fed”) may not have a strong understanding of the Fed itself. The Federal Reserve is comprised of:

  • The Federal Reserve Board of Governors
  • 12 Federal Reserve banks
  • The Federal Open Market Committee (FOMC)

The Federal Reserve System is, chiefly, the central bank of the United States. Within this seemingly-simple designation lie many duties and functions, including setting monetary policy for the United States.

The Board of Governors is the conduit between the federal government of the United States and the Federal Reserve system. The Board of Governors has seven members who set discount rates (also known as interest rates) and requirements for what percentage of deposits banks must keep in reserves.

The Federal Open Market Committee (FOMC) has 12 members centered in New York City. Seven of the members are the Board of Governors plus the head of the Reserve Bank of New York and four rotating heads of other Reserve Banks. This Committee meets eight times per year and is said to formulate their monetary policy through these meetings.

12 Federal Reserve Banks make up the physical network that is the national Federal Reserve System. The Reserve Banks lie within 12 geographical districts spanning the nation, and each bank services the states within its jurisdiction. While banks were originally given leeway to set their own policy, they were eventually resigned to being outlets for FOMC-set policies.

Reserve Banks do not have the impact that the Federal Open Market Committee or Board of Governors do. Reserve Bank heads alone cannot change interest rates, implement new regulations, or change reserve requirements. The Reserve Bank heads do, however, serve on the Federal Open Market Committee and so the specific presidents of Reserve Banks are important in that respect.

On an individual basis, Reserve Banks’ importance includes:

  • Regulating FDIC member financial institutions within their geographical region
  • Providing financial services to depository banks in their region
  • Implementing Fed-dictated policy on a regional level

You can think of Federal Reserve Banks as the arms of the Federal Reserve’s greater body. You may be able to live without them, but you probably wouldn’t choose to.

I have a confession: the question of who owns the Federal Reserve was something of a trick one. The Democratic Staff of the Joint Economic Committee (p.4) notes that, upon the creation of the Federal Reserve, “Congress designed the Fed to be an independent agency within government.”

Independent, but of the government. Huh?

This unique arrangement essentially means that the Fed is, at least in theory, supposed to make the decisions it believes to be in the nation’s best interest without being subject to political pressures. Despite this supposed independence, Fed leadership is still “accountable to Congress”, as the Democrafti Staff puts it.

Noted features that support the view of the Fed as independent include:

  • That it is not federally-funded, but instead funded by its own revenues created by lending, fees, and investments
  • Long, staggered 14-year terms for Fed appointees intended to limit the impact that any single presidential administration can have on Fed policy

These features are intended to make the Fed independent, but it certainly does not make the Fed beyond reproach.

A 2009 Gallup poll found that the only federal entity Americans viewed more negatively than the Federal Reserve was the IRS. When tax collectors are the only ones you are looking down on popularity-wise, you know that you have your fair share of critics.

Some criticisms of the Fed include:

  • That it is, despite its design, susceptible to political sway
  • That it has an outsize impact to contribute to financial busts
  • That it lacks transparency
  • That it does not truly have the interests of the American people at heart, with bailouts of investment banks with taxpayer dollars being one specific critique

Critiques of the Fed, fair or not, shine a light on why cryptocurrencies have been embraced as what some see as a more trustworthy, less manipulable store of value than the U.S. dollar.

The Federal Reserve remains a lightning rod for criticism despite our findings that many Americans do not fully comprehend the Fed’s role in the American and global economies. The Fed shapes American monetary policy, which ultimately contributes to the ebbs and flows of global markets and economies.

Though it purports to be an independent entity, proponents of cryptocurrency often beg to differ. We argue instead that decentralization is the only true building block for financial independence.

Why don’t you start mining Bitcoin or Ethereum with us? Create your free dashboard, and buy some hashpower! Sign up now!



The world's leading and most transparent hosted hashpower provider for Bitcoin and Altcoins. Reliable & Customer Oriented.

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store
Genesis Mining

The world's leading and most transparent hosted hashpower provider for Bitcoin and Altcoins. Reliable & Customer Oriented.