Overview
The Federal Reserve System (the Fed) is the central banking system of the United States. Unlike most central banks, the Fed is not a purely government institution - it's a hybrid structure where private banks own stock in the regional Federal Reserve Banks, while the Board of Governors is a government agency.
The Federal Reserve has the power to create money out of nothing, set interest rates that affect the entire economy, and act as a "lender of last resort" to banks. Critics argue this gives private banking interests unprecedented control over the American economy and has enabled the transfer of wealth from ordinary citizens to the financial elite through inflation and debt.
The creation of the Fed was conceived in secret at a clandestine meeting of the nation's most powerful bankers at Jekyll Island, Georgia in 1910 - a fact that was denied for decades but is now acknowledged by the Federal Reserve itself.
"Give me control of a nation's money supply, and I care not who makes its laws."
- Mayer Amschel Rothschild (attributed)
"The Federal Reserve banks are one of the most corrupt institutions the world has ever seen. There is not a man within the sound of my voice who does not know that this Nation is run by the international bankers."
- Congressman Louis T. McFadden, Chairman of the House Banking Committee, 1932
The Jekyll Island Meeting
In November 1910, a secret meeting took place at the exclusive Jekyll Island Club off the coast of Georgia. The attendees represented approximately one-quarter of the world's wealth at the time. The meeting was so secret that participants were instructed to use only first names to avoid identification by the staff.
The Participants
Senator Nelson Aldrich
Chairman, Senate Finance Committee
Father-in-law to John D. Rockefeller Jr. Led the National Monetary Commission. Organized the Jekyll Island meeting and introduced the bill in Congress.
Frank Vanderlip
President, National City Bank of New York
Representative of Rockefeller banking interests. Later published an article in the Saturday Evening Post confirming the secret meeting.
Henry P. Davison
Senior Partner, J.P. Morgan & Company
Morgan's right-hand man. Represented the Morgan banking empire at the meeting.
Charles D. Norton
President, First National Bank of New York
Another Morgan ally. Helped draft the legislation that would become the Federal Reserve Act.
Benjamin Strong
Banker, Morgan's Bankers Trust
Later became the first head of the Federal Reserve Bank of New York - the most powerful position in the system.
Paul Warburg
Partner, Kuhn, Loeb & Company
German-born banker connected to the Rothschild banking network. Primary architect of the Federal Reserve System.
Secrecy Confirmed
The secret nature of the meeting was denied for years. In 1930, Paul Warburg's biography confirmed it. In 1935, Frank Vanderlip wrote in the Saturday Evening Post: "Our secret expedition to Jekyll Island was the occasion of the actual conception of what eventually became the Federal Reserve System... Discovery, we knew, simply must not happen."
History & Timeline
First Bank of the United States
Alexander Hamilton establishes first central bank. Charter expires in 1811 after opposition led by Thomas Jefferson.
Second Bank of the United States
Second central bank established. President Andrew Jackson vetoes its recharter, calling it a "den of vipers" serving foreign interests.
The Panic of 1907
Financial crisis that some historians argue was deliberately engineered to create demand for a central bank. J.P. Morgan "saves" the system, demonstrating the "need" for a permanent solution.
Jekyll Island Meeting
Secret meeting of the nation's most powerful bankers drafts what will become the Federal Reserve Act.
Federal Reserve Act Signed
President Woodrow Wilson signs the Federal Reserve Act into law just before Christmas recess, when many Congressmen had already left.
Fed Begins Operations
Federal Reserve System opens for business with 12 regional banks. Benjamin Strong becomes head of the powerful New York Fed.
Stock Market Crash
After expanding credit throughout the 1920s, the Fed contracts the money supply, contributing to the crash and Great Depression.
Gold Confiscation
FDR issues Executive Order 6102, requiring citizens to surrender their gold. The price is then raised from $20.67 to $35 per ounce, effectively devaluing the dollar.
Nixon Closes Gold Window
President Nixon ends gold convertibility, making the dollar a pure fiat currency backed by nothing but government decree.
Financial Crisis Bailouts
Fed provides trillions in secret loans to banks and corporations worldwide. Details only revealed through Congressional audit in 2011.
COVID Money Printing
Fed expands balance sheet by $4+ trillion, creating money at unprecedented rates. Results in significant inflation.
Structure & Ownership
The Federal Reserve's hybrid structure creates confusion about who actually controls it.
The Structure
- Board of Governors: 7 members appointed by the President, confirmed by Senate. Ostensibly the "government" part.
- 12 Regional Federal Reserve Banks: Privately owned by member banks in each district. The New York Fed is by far the most powerful.
- Federal Open Market Committee (FOMC): Sets monetary policy. Includes Board members plus regional Fed presidents.
- Member Banks: Commercial banks that own stock in their regional Fed. Required for national banks, optional for state banks.
Who Owns the Fed?
The regional Federal Reserve Banks are owned by the private member banks in each district. These private banks receive 6% dividends on their Fed stock. The ownership structure of the New York Fed - which conducts open market operations and is most powerful - includes the largest Wall Street banks.
"Neither Federal Nor a Reserve"
Despite its official-sounding name, the Federal Reserve is not a government agency in the traditional sense. It operates independently, is not subject to Freedom of Information Act requests, and has never been fully audited. As former Fed Chairman Alan Greenspan stated: "The Federal Reserve is an independent agency, and that means basically that there is no other agency of government which can overrule actions that we take."
The Problems
Critics argue the Federal Reserve system is fundamentally designed to benefit banks at the expense of ordinary people.
Inflation - The Hidden Tax
Since the Fed's creation in 1913, the dollar has lost over 96% of its purchasing power. What cost $1 in 1913 costs over $30 today. This inflation acts as a hidden tax, transferring wealth from savers to borrowers and from workers to asset owners.
Boom-Bust Cycles
The Fed's manipulation of interest rates and money supply creates artificial boom-bust cycles:
- Low rates encourage borrowing and speculation, creating bubbles
- When rates rise, bubbles burst, causing recessions
- The wealthy can exploit these cycles; ordinary people are devastated
- Each crisis is used to justify more Fed power and more bailouts
Bank Bailouts
When banks face consequences for their risky behavior, the Fed bails them out:
- 2008: Over $16 trillion in secret loans revealed by 2011 audit
- Recipients included foreign banks, corporations, and wealthy individuals
- Meanwhile, millions of Americans lost homes and jobs
- No bank executives were imprisoned for the fraud that caused the crisis
Debt Slavery
Under the current system, money is created as debt:
- When the Fed creates money, it's loaned into existence - with interest
- The interest can only be paid with more borrowed money
- This mathematically guarantees ever-increasing debt
- National debt: $0 in 1913 → $34+ trillion today
What They Said
Many prominent figures have warned about central banking and the Fed:
"I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit... all our activities are in the hands of a few men."
- President Woodrow Wilson (attributed, disputed)
"The financial system has been turned over to the Federal Reserve Board. That board administers a finance system by authority of a purely profiteering group. The system is private, conducted for the sole purpose of obtaining the greatest possible profits from the use of other people's money."
- Congressman Charles A. Lindbergh Sr., 1913
"If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their Fathers conquered."
- Thomas Jefferson (attributed, disputed)