Is the Fed Public or Private? It’s the Worst of Both Worlds

While it was once verboten to imply that the Fed is anywhere near being a private for-profit corporation, and doing so would immediately (and absurdly) cause you to be labeled some kind of whacko conspiracist, even the Fed itself has been forced to admit that it is, at least in part, a cartel of private companies and enjoys an “intermediate” legal status. From the website of the Federal Reserve Bank of St. Louis:

“The answer is both. While the Board of Governors is an independent government agency, the Federal Reserve Banks are set up like private corporations. Member banks hold stock in the Federal Reserve Banks and earn dividends…Member banks also elect six of the nine members of each Bank’s board of directors.”

So when, and how, did the Overton Window shift enough that the Fed was forced to admit to being a corporate partnership with direct and significant influence over the public? Ron Paul fought that battle for decades, slowly chipping away at the central bank orthodoxy and changing the acceptability of the notion that the Fed is a private institution. Rand Paul carried that torch forward with his Audit the Fed bill (with credit to Bernie Sanders for supporting some versions of Fed audits as well). These efforts helped reveal in full form that the Fed is an institution ruled, by design, by conflict of interest. For example, it uncovered that Jamie Dimon sat on the Fed Board of Governors as JP Morgan bank received $390 billion from the central bank, all as JP Morgan operated as a clearinghouse for Federal Reserve emergency lending programs.

Later, Fed regional presidents Robert Kaplan and Eric Rosengren were revealed to have been trading millions in stocks, options, and securities as the Fed itself was adding mortgage-backed securities to its balance sheet. Appallingly, their acts were deemed “legal” even as they came under scrutiny, showing that despite the finger wag, their money printer trades were completely legally-sanctioned. The wrongdoing was framed within the context of these scoundrels not reporting their trades, much more so than the morally dubious nature of the trades themselves. 

The notion that the Fed is both a government agency (but not like the Treasury) and also a private corporation (but not like JP Morgan) is preposterous, as it insists that the Fed is subject to “congressional oversight” while also remaining “independent” of politics. The reality is, the Fed operates with practically no oversight at all, and is a perverted union of the political system and the private banking industry where industry insiders get to pull the levers on the global economy, give infinite free money to their banker friends, and engineer booms and busts that they can (and do) later profit from, either directly or through proxies. 

For example, in the wake of the COVID money-printing bonanza, BlackRock’s assets under management ballooned from over $9 trillion in Q1 2022 to $11.5 trillion in 2024, a feat that never would have been possible under a free market system where assets are bought and sold according to natural economic pressures and the King Vampire Squid would have been subjected to higher interest rates and never handed boatloads of QE “stimulus” cash through the Fed purchasing enormous volumes of of debt securities. It’s no surprise that when these corporatist Cantillionaire parasites get a metaphorical shipping container packed with free, freshly-printed money, they scoop up assets that have turned dirt-cheap from whatever crash the money printing was a response to, and their stock price goes up higher than ever:

BlackRock Stock, 2020 to Present

Meanwhile, American citizens got a $1200 check and an epic run-up in the prices of consumer goods as the purchasing power of their dollars tanked. Even by official numbers, which massively underreport inflation, that $1200 has already eroded down to about $950. But don’t tell the Americans who splurged it all on home improvements and impulse purchases, blissfully unaware that the real price of groceries would soon skyrocket by, according to reports from some consumers, well over 200%.

With the Fed forced into a rate-cutting cycle as Trump begins his first term, inflationary pressures will get even worse. Massive spending cuts to reduce budget deficits could offset some of that, but will Trump 2.0 drastically shrink the size of government or, hoping for a boost from the Fed like he has in the past, beg the central bank to print, print, print while its controllers profit from the next round of free money?

The Fed is a private-public hybrid monster set up to provide free money socialism for the corporatists and megabanks, and “you’re on your own” capitalism for everyone else. With profits privatized and losses shifted to the public, it’s going to take a more radical shift than Trump to change those fundamentals.

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