The History and Organization of the Federal Reserve: The What and Why of the United States’ Most Powerful Banking Organization

Monday, April 23, 2018
By Paul Martin

BY CATHERINE AUSTIN-FITTS
THEDAILYCOIN.ORG
APRIL 23, 2018

The History and Organization of the Federal Reserve: The What and Why of the United States’ Most Powerful Banking Organization Posted by SOLARI STAFF

“Whoever controls the volume of money in any country is absolute master of all industry and commerce.”
-James A. Garfield, 20th President of the United States

I. Introduction
The Federal Reserve is one of the most influential organizations in the U.S. when it comes to economic policy. It is also one of the least well understood elements of the government–especially in that it is not really truly a government organization. Its top level officials are a government agency of the Executive branch. However the Federal Reserve, and especially its 12 Federal Reserve District Banks, occupy a strange twilight zone between government agency and private banking organization.

This status has come up in court cases, where the district banks of the Federal Reserve have argued successfully that that they are not a government agency–instead being classified as “federally created instrumentalities.” (Scott v. Federal Reserve Bank of Kansas City, No. 04-2357 (8th Circ. Ct of App, 2005)(available at http://media.ca8.uscourts.gov/opndir/05/04/042357P.pdf)). A cynical person might say that they are part of the Federal government where advantageous and separate when it is not. However, it is enough to say that the Federal Reserve has an complex, hybrid structure to it.

The Federal Reserve itself has quite a bit of involvement in creating the monetary policy of the U.S. The most commonly discussed ways it influences the economy include acting as a last resort lender to member banks, regulating private banking, and–perhaps above all–setting the discount rate on loans to solve temporary liquidity issues for private banks across the county.

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