Central banks are weird animals. The US Federal reserve is a no exception. In the UK they would call it a quango, quasi government public entity. The FED is owned by shareholders and is actually a private not govt. entity, buts it management is appointed for 14 years terms by the president. Sounds like a heck of a system. Here is some more info.
Trivia about the fed:
The fed isn’t allowed to participate in lotteries
Not sure if that is on the selling or the buying tickets end of the deal.
Earnings of the fed can be used to top up the gold of the US treasury.
The net earnings derived by the United States from Federal reserve banks shall, in the discretion of the Secretary, be used to supplement the gold reserve held against outstanding United States notes, or shall be applied to the reduction of the outstanding bonded indebtedness of the United States under regulations to be prescribed by the Secretary of the Treasury.
The Fed is exempt from all taxes except real estate
Federal reserve banks, including the capital stock and surplus therein, and the income derived therefrom shall be exempt from Federal, State, and local taxation, except taxes upon real estate.
The fed is still allowed to produce $10,000 notes.
Let's hope we don’t see those floating around. If you find yourself buying cigarettes and beer with a $10k note, things have probably slipped a bit and we are on TARP version 30.1.
TIP:They discontinued the $100,000 note in 1945, so don't take one as change, it may be fake ;).
Foreign securities aren’t allowed to be pledged as security
No obligations of any foreign government, individual, partnership, association, or corporation organized under the laws thereof shall be eligible as collateral security for advances under this section.
The federal reserve can create its own “police force”
Law enforcement officers designated or authorized by the Board or a reserve bank are authorized while on duty to carry firearms and make arrests without warrants for any offense against the United States committed in their presence, or for any felony cognizable under the laws of the United States committed or being committed within the buildings and grounds of the Board or a reserve bank if they have reasonable grounds to believe that the person to be arrested has committed or is committing such a felony.
Fed meetings schedules are determined by whether it is an on odd or even year.
1. before the Committee on Banking and Financial Services of the House of Representatives on or about February 20 of even numbered calendar years and on or about July 20 of odd numbered calendar years;
2. before the Committee on Banking, Housing, and Urban Affairs of the Senate on or about July 20 of even numbered calendar years and on or about February 20 of odd numbered calendar years.
The Fed uses a rating system known as CAMELs which ranks banks from 1-5 for soundness.
You don’t want a lot of 5 camel banks. In a very interesting approach to game theory which I agree with the CAMEL rating system and ranks for banks aren’t published. One hopes this prevents gaming of the system and reporting. This lack of disclosure is based in my own opinion on an understanding of the nature of behavioural dynamics and rules systems. To sum up people always try to get a ahead and when it comes to risk that can be collectively very bad.
In a very interesting approach to game theory which I agree with the CAMEL rating system and ranks for banks aren’t published. One hopes this prevents gaming of the system and creative reporting jiggery pokery. This lack of disclosure is perhaps based on an understanding of the nature of behavioural dynamics and rules systems. To sum up, people always try to get a ahead and when it comes to risk that can be collectively very bad.
I won't go into details about why the ratings secrecy is important, but for those of you who know the ratings agency games and how securitization really worked you will get it.
Fed ownership is a bit circular these days.
The fed is owned by shareholders. It is generally assumed these shareholders are major banks. The fed has been bailing out the major banks. I will leave it up to you gentle reader to interpret the implications of the associated megaponz diagram.
In an example of inflation for kids using babysitting as an
example, the fed suggested that if inflation eats into your popcorn money you
should ask your neighbor for a raise. No
advocates of eating less popcorn. Wonder why we had a savings problem...
The wikipedia entry for the FED
History of central banking in the US.
