Federal Reserve/Conspiracy Theory

[Cluricaun]

In a conversation I was having with a conspiracy buff, he made a big deal that a private company, the Federal Reserve, was the issuer of all paper monies in the US. According to him only coins are actually issued by the US Government. First off I guess, is this the truth? I was under the impression that the Department of the Treasury was the body that issues all us monies.

Secondly, could then the US Treasury department issue a coin in a high enough denomination to pay off the Federal Reserve? My friend seemed to think this a great idea, but couldn’t exactly say why. Any ideas on helping me call a potential BS on these?

[Q.E.D]

The Federal Reserve System is not a private company:

Who owns the Federal Reserve?
The Federal Reserve System is not “owned” by anyone and is not a private, profit-making institution. Instead, it is an independent entity within the government, having both public purposes and private aspects.

As the nation’s central bank, the Federal Reserve derives its authority from the U.S. Congress. It is considered an independent central bank because its decisions do not have to be ratified by the President or anyone else in the executive or legislative branch of government, it does not receive funding appropriated by Congress, and the terms of the members of the Board of Governors span multiple presidential and congressional terms. However, the Federal Reserve is subject to oversight by Congress, which periodically reviews its activities and can alter its responsibilities by statute. Also, the Federal Reserve must work within the framework of the overall objectives of economic and financial policy established by the government. Therefore, the Federal Reserve can be more accurately described as “independent within the government.”

[Tastes_of_Chocolate]

Who owns the Federal Reserve

The Federal Reserve System is not “owned” by anyone and is not a private, profit-making institution. Instead, it is an independent entity within the government, having both public purposes and private aspects.

Does the Fed produce notes and coins?

No, the Federal Reserve does not produce bank notes or coins. The Bureau of Engraving and Printing (BEP) produces currency and stamps, and the U.S. Mint produces our nation’s coins. The Federal Reserve issues Federal Reserve notes and places them in circulation.

[js_africanus]

You can check out their site at www.federalreserve.gov

The Fed was established by an act of Congress; whether they are technically private I guess I can’t say. The Treasury prints money; but the Fed has the tools to control the money supply by setting the interest rate at which it loans to member banks, by setting the reserve requirements, and by buying or selling bonds in the open market.

“Issuing a coin high enough to pay off the Federal Reserve” is a nonsense phrase. This is because there would be nothing to pay off. The Treasury may sell bonds to fund federal budget deficits, but those are sold to private investors. The Treasury AFAIK is not in debt to the Fed with the exception that the Fed buys bonds as a money-supply tool. The Fed may hold Treasury bonds, but if there were no Treasury bonds on the market, then the Fed would just buy bonds issued from other sources.

If the Treasury bought back all its bonds from the Fed, the Fed would just have to buy bonds issued from other sources. Then Congress would either have to take out more debt to pay for those bonds, or they would have to increase taxes/decrease spending to foot the bill.