Most Americans may have a general sense that federal entities have some influence over their money, as they certainly notice when taxes are withheld from their paychecks. Findings from our recent report, the Perceptions and Understanding of Money – 2020 indicate that knowledge of the US national banking system often does not go much deeper than the “general feeling” phase.

The average consumer, in particular, lacks insight into the Federal Reserve, despite being arguably the most important institution in the US economy.

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

7% of respondents named companies as owners of the Federal Reserve. Assuming those who believe that corporations or state partnerships own the Fed are not simply exercising a healthy cynicism, it seems clear that most Americans could use some clarity as to who exactly are the lords about the Federal Reserve.

The Federal Reserve, explained

Those who do not have a clear understanding of who owns the Federal Reserve (the “Fed”) may not have a clear understanding of the Fed itself. The Federal Reserve consists of:

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

The Federal Reserve System is primarily the central bank of the United States. Within this seemingly simple designation lie many tasks and functions, including determining monetary policy for the United States.

The Board of Directors is the channel between the Federal Government of the United States and the Federal Reserve system. The Board of Directors has seven members who set discount rates (also known as interest rates) and set requirements for what percentage of deposits banks must hold in reserves.

The Federal Open Market Committee (FOMC) has 12 members based 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 a year and would formulate their monetary policy through these meetings.

Federal Reserve Banks span the nation

12 Federal Reserve Banks form the physical network that is the national Federal Reserve System. The reserve banks are located in 12 geographic districts across the country, and each bank serves the states within its jurisdiction. While banks were initially given the freedom to set their own policies, they were eventually laid down as a selling point for FOMC policies.

Reserve banks do not have the impact that the Federal Open Market Committee or the Board of Directors does. The heads of the reserve bank alone cannot change interest rates, implement new regulations or change reserve requirements. However, the heads of the reserve bank are part of the Federal Open Market Committee and so the specific presidents of the reserve banks are important in that regard.

On an individual basis, The importance of reserve benches includes:

  • Regulation of financial institutions that are members of the FDIC within their geographic region
  • Provide financial services to deposit banks in their region
  • Implement policy dictated by the Fed at the regional level

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

Federal Reserve Banks, and the Fed itself, are independent

I have a confession: Asking who owns the Federal Reserve was quite a ruse. The democratic staff of the Joint Economic Committee (p.4) notes that, when the Federal Reserve was established, “Congress designed the Fed as an independent body within the government.”

Independent, but from the government. Huh?

This unique arrangement essentially means that the Fed must, at least in theory, make the decisions it believes are in the best interests of the nation, without being subject to political pressure. Despite this presumed independence, the Fed’s leadership is still “accountable to Congress,” as the Democrafti Staff put it.

Notable features that support the Fed’s stance as independent include:

  • That it is not federally funded, but instead funded by its own income created through loans, fees and investments
  • Long, staggered 14-year terms for Fed appointees, designed to limit the impact a 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 flawless.

Criticism of the Federal Reserve System

A Gallup Survey 2009 found that the only federal entity that rated Americans more negatively than the Federal Reserve was the IRS. If tax collectors are the only ones you look down on in terms of popularity, you know you’ve got your fair share of critics.

Some criticisms of the Fed include:

  • That, despite its design, it is prone to political influence
  • That it has too great an impact to contribute to financial failures
  • That it lacks transparency
  • That it doesn’t really have the interests of the American people in mind bailouts of investment banks with taxpayer dollars be a specific criticism

Criticisms of the Fed, fair or not, shed light on why cryptocurrencies have been embraced as what some see as a more reliable, less manipulable store of value than the US dollar.


The Federal Reserve remains a lightning rod of criticism despite our findings that many Americans do not fully understand the role of the Fed in the US and global economy. The Fed shapes US monetary policy, which ultimately contributes to the ebb and flow of global markets and economies.

Although it claims to be an independent entity, cryptocurrency advocates often differ. Instead, we argue that decentralization is the only real building block for financial independence.

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