# Questions about the federal reserve **URL:** \ **Category:** Great Debates\ **Created:** [November 29, 2008, 3:27pm UTC](https://boards.straightdope.com/t/questions-about-the-federal-reserve/474928 "2008-11-29T15:27:56Z")\ **Posts on this page:** 20\ **Page:** 1
**Author:** ![misterW](https://avatars.discourse-cdn.com/v4/letter/m/f1d935/32.png) [@misterW](https://boards.straightdope.com/u/misterW)\ **Post date:** [November 29, 2008, 3:27pm UTC](https://boards.straightdope.com/t/questions-about-the-federal-reserve/474928/1 "2008-11-29T15:27:56Z")
I have some friends (Ron Paul supporters) who are strongly against the federal reserve, to the point that they feel real progress in the country is impossible within the confines of the current system. I am a little leery of some of their assertions and was hoping some of the people here could clear some things up for me. 1. Is the federal reserve in some way responsible for the current financial crisis by allowing banks to make loans to people with poor credit? In what fashion does the reserve regulate this sort of thing? 2. What do the majority of other governments in the world do as far as money creation? If money is needed to finance some massive undertaking like a war, does the government create it or do they borrow it from some quasi-independent body like the federal reserve? Thanks in advance and please do not hesitate to correct any misunderstandings implied by my questions… ---
**Author:** ![Rysto](https://avatars.discourse-cdn.com/v4/letter/r/ecccb3/32.png) [@Rysto](https://boards.straightdope.com/u/Rysto)\ **Post date:** [November 29, 2008, 4:07pm UTC](https://boards.straightdope.com/t/questions-about-the-federal-reserve/474928/2 "2008-11-29T16:07:49Z")
Your friends, frankly, don’t have a clue what they’re talking about. Even if the Federal Reserve did “allow” banks to make loans to people with poor credit, what of it? Are your Libertarian friends seriously suggesting that government regulation is the solution? :eek: Anyway, to the best of my knowledge the Fed doesn’t have any regulatory powers in this area. The US Federal Government does not borrow money from the Federal Reserve. They, like all other western governments, finance deficits by issuing bonds. Some of those bonds are traded by the Federal Reserve as a part of monetary policy – but it’s all done on the open market. ---
**Author:** ![siggma](https://avatars.discourse-cdn.com/v4/letter/s/da6949/32.png) [@siggma](https://boards.straightdope.com/u/siggma)\ **Post date:** [November 29, 2008, 5:57pm UTC](https://boards.straightdope.com/t/questions-about-the-federal-reserve/474928/3 "2008-11-29T17:57:26Z")
> [@misterW](#): > > I have some friends (Ron Paul supporters) who are strongly against the federal reserve, to the point that they feel real progress in the country is impossible within the confines of the current system. I am a little leery of some of their assertions and was hoping some of the people here could clear some things up for me. > > 1. Is the federal reserve in some way responsible for the current financial crisis by allowing banks to make loans to people with poor credit? In what fashion does the reserve regulate this sort of thing? > > 2. What do the majority of other governments in the world do as far as money creation? If money is needed to finance some massive undertaking like a war, does the government create it or do they borrow it from some quasi-independent body like the federal reserve? > > Thanks in advance and please do not hesitate to correct any misunderstandings implied by my questions… First, if you weren’t aware the Federal Reserve Bank is a _privately owned_ bank, not a government institution. A fact the “government” does not advertise. You can read more about this unfortunate situation by Googling for “constitutional amendment federal reserve”. Back in the 30’s an amendment was enacted called the [Federal Reserve Act](http://www.federalreserve.gov/aboutthefed/section1.htm). Next, the FRB, is a privately owned bank with a government sanctioned “charter” (they can print money) and having no general oversight beyond the non-government appointed board of directors, can print money whenever they feel the need or the inclination. The need to issue currency is a necessity but we went off the gold standard a long time ago. So how do they decide the value of currency? Recall the big thing about “National Debt”? Who do you think is the #1 creditor on the list of people the government, and in the mind of the FRB BOD the US population, owes? So, what exactly **is** money based on? How do they decide when to print more? What happens if they print too much money? How do they distribute this newly printed money? How does this board of geniuses regulate an entire economy? How do they resist the temptation to print money without working? If you’re beginning to see gross dishonesty in the entire concept you’re not alone. The fact is, we as US citizens are being “farmed” by the FRB board and it’s stockholders, I’m sure none of which are US citizens. A stable economy according to the FRB is an economy where the “farmers” (owners of the collective _Reserve Banks_) limit how much extra money they print in relation to the overall GNP (we’re referred to as _the animals_ by the collective ideocracy of the FRB). If they print too much we see a devaluation of the dollar, recession, inflation etc. It’s doubtful they would ever print too little. The FRB really only has two basic levers they can push and pull to regulate _their_ “economy” and most of them do see the US as their personal property. Those two levers are the quantity of currency in circulation and the prime interest rate. You can figure the rest out from here. If our currency were based directly on labor (1hour=1dollar\*experience) and currency were created only as a means to trade labor, we’d have no problem with inflation because we would no longer be simply “animals”. Our economy would be very stable. Someday when the people of the Earth get tired of all the lies, theft and blame there will be an uprising that will hopefully quell the current, constant economic disaster collectively titled the [Reserve Banks](http://www.reserve-bank.com/cb.htm). -Tom ---
**Author:** ![siggma](https://avatars.discourse-cdn.com/v4/letter/s/da6949/32.png) [@siggma](https://boards.straightdope.com/u/siggma)\ **Post date:** [November 29, 2008, 6:11pm UTC](https://boards.straightdope.com/t/questions-about-the-federal-reserve/474928/4 "2008-11-29T18:11:09Z")
> [@Rysto](#): > > Your friends, frankly, don’t have a clue what they’re talking about. > > … clip … > > The US Federal Government does not borrow money from the Federal Reserve. They, like all other western governments, finance deficits by issuing bonds. Absolutely untrue. There may not be any directly traceable transactions but they do indeed draw loan proceeds from the FRB. Who do you think finances wars? Not just in the US but abroad? Is al qaeda really the epitome of all evil in the world, or is it the dishonesty of the Global Banking Community at large, financing wars so they can make loads to rebuild? > [@](#): > > Some of those bonds are traded by the Federal Reserve as a part of monetary policy – but it’s all done on the open market. Again, absolutely untrue. There may be US laws against such things as unregulated banking transactions but the FRB and it’s allied global reserve banks _are not obligated or regulated by US banking policy or it’s laws_. In fact their only reason for not destroying the economy is that they are dependent upon it. If you find out what’s happening you might revolt and that would be very bad for them. So they have a vested interest in keeping the economies of the world afloat. But, gross dishonesty, blame and lack of foresight are clearly taking a toll. I think it’s only a matter of time before the current economies of the world collapse. Possibly in my lifetime. -Tom ---
**Author:** ![Hari\_Seldon](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/hari_seldon/32/5173_2.png) [@Hari\_Seldon](https://boards.straightdope.com/u/Hari_Seldon)\ **Post date:** [November 29, 2008, 6:21pm UTC](https://boards.straightdope.com/t/questions-about-the-federal-reserve/474928/5 "2008-11-29T18:21:01Z")
Libertairans are, by definition, opposed to all government regulation. Do they really think that an unregulated banking system would not have gotten us into this mess? It was precisely lack of regulation of certain financial institutions that got us into it. A harder question is whether the Federal Reserve could have prevented or at least ameliorated the situation. Given the deregulation during the Reagan years and after, it is hard to imagine they could have prevented it. They did act as cheerleaders and a policy of higher discount rates (the rate the Fed charges banks for turning bank loans into cash for the banks) might have discouraged all the excess credit. Most of the regulatory controls on banks were put in during the 30s since it had become obvious that unregulated banks (and other financial institutions) were at least partly responsible for the great depression. It was thought that these controls would prevent such a depression from ever happening again. And I think they would have, had not a generation of bankers and politicians not appreared for whom regulations seemed to cause a brake on profits. Another control that there used to be (I don’t know if still exists) was the margin requirement. In the fifties the margins on stock purchases were mostly 50% but sometimes raised to 100%. This meant that you had to put in cash at least 50% and sometimes 100% of what a stock costs. The margin requirement was set by the Fed. I assume they no longer have that power. If the margin requirements are high, they you cannot highly leverage your investments. On the other hand, you will not have to make forced sales to cover your margins. These forced sales did a lot to exacerbate the current crisis. In fact, they probably almost entirely explained it. ---
**Author:** ![Exapno\_Mapcase](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/exapno_mapcase/32/1051_2.png) [@Exapno\_Mapcase](https://boards.straightdope.com/u/Exapno_Mapcase)\ **Post date:** [November 29, 2008, 7:06pm UTC](https://boards.straightdope.com/t/questions-about-the-federal-reserve/474928/6 "2008-11-29T19:06:28Z")
> [@siggma](#): > > First, if you weren’t aware the Federal Reserve Bank is a _privately owned_ bank, not a government institution. Standard conspiracy theory. From [Wiki](http://en.wikipedia.org/wiki/Federal_Reserve_System): > [@](#): > > The Federal Reserve System is considered to be an independent central bank because its decisions do not have to be ratified by the President or anyone else in the executive branch of government. The System is, however, subject to oversight by the U.S. Congress. The Federal Reserve must work within the framework of the overall objectives of economic and financial policy established by the government; therefore, the description of the System as “independent within the government” is more accurate. ([http://www.federalreserve.gov/pf/pdf/pf\_1.pdf](http://www.federalreserve.gov/pf/pdf/pf_1.pdf)) > > The Federal Reserve System is an independent government institution that has private aspects. The System is not a private organization and does not operate for the purpose of making a profit. The stocks of the regional federal reserve banks are owned by the banks operating within that region and which are part of the system.[26] The System derives its authority and public purpose from the Federal Reserve Act passed by Congress in 1913. > [@](#): > > Back in the 30’s an amendment was enacted called the [Federal Reserve Act](http://www.federalreserve.gov/aboutthefed/section1.htm). The Federal Reserve Act was passed in 1913. There was an [amendment in the 1930s, true](http://en.wikipedia.org/wiki/Federal_Reserve_Act). > [@](#): > > In the 1930’s the Federal Reserve Act was amended to create the Federal Open Market Committee (FOMC) consisting of the seven members of the Board of Governors of the Federal Reserve System and five representatives from the Federal reserve banks (Section 12B). The FOMC is required to meet at least four times a year (the practice is usually eight times) and is empowered to direct all open-market operations of the Federal reserve banks. > [@](#): > > Next, the FRB, is a privately owned bank with a government sanctioned “charter” (they can print money) and having no general oversight beyond the non-government appointed board of directors, From the link you gave us: > [@](#): > > Section 10. Board of Governors of the Federal Reserve System > > 1. Appointment and Qualification of Members > The Board of Governors of the Federal Reserve System (hereinafter referred to as the “Board”) shall be composed of seven members, to be appointed by the President, by and with the advice and consent of the Senate, The rest is opinion that doesn’t belong in GQ, which is for factual answers. ---
**Author:** ![MEBuckner](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/mebuckner/32/2896_2.png) [@MEBuckner](https://boards.straightdope.com/u/MEBuckner)\ **Post date:** [November 29, 2008, 10:34pm UTC](https://boards.straightdope.com/t/questions-about-the-federal-reserve/474928/7 "2008-11-29T22:34:43Z")
> [@misterW](#): > > 1. What do the majority of other governments in the world do as far as money creation? If money is needed to finance some massive undertaking like a war, does the government create it or do they borrow it from some quasi-independent body like the federal reserve? The U.S. Federal Reserve System is a [central bank](http://en.wikipedia.org/wiki/Central_bank). These days, most other countries have a central bank, under one name or another. ---
**Author:** ![IAmNotSpartacus](https://avatars.discourse-cdn.com/v4/letter/i/cc9497/32.png) [@IAmNotSpartacus](https://boards.straightdope.com/u/IAmNotSpartacus)\ **Post date:** [November 29, 2008, 11:33pm UTC](https://boards.straightdope.com/t/questions-about-the-federal-reserve/474928/8 "2008-11-29T23:33:03Z")
The Fed is a quasi-government agency. It is most certainly not a private entity. ---
**Author:** ![siggma](https://avatars.discourse-cdn.com/v4/letter/s/da6949/32.png) [@siggma](https://boards.straightdope.com/u/siggma)\ **Post date:** [November 30, 2008, 3:05am UTC](https://boards.straightdope.com/t/questions-about-the-federal-reserve/474928/9 "2008-11-30T03:05:54Z")
Exapno Mapcase et.al.; Anything you don’t know about or agree with is a “conspiracy” theory? Your mistaking the words “governing board” for the term “board of directors”. The actual FRB is a private bank. While there is a “governing board” with it’s head appointed by the president, the actual _board of directors_ of the FRB made up mostly of it’s stockholders are not part of that board. As of February 2006, Ben Bernanke serves as the Chairman of the _ **Board of Governors** _ of the Federal Reserve System. Prior to that it was Alan Greenspan. From his wiki page: > [@](#): > > Alan Greenspan (born March 6, 1926 in New York City) is an American economist and was from 1987 to 2006 the Chairman of the Federal Reserve of the United States. Many “conspiracy theory” advocates thought having Greenspan as Chairman of the Governing Board was a conflict of interest. It’s suspected but never been proven that I know of, that he holds at least some of the FRB paper that’s now publicly rapidly loosing value, although it’s real value is only that of it’s weight in cellulose and ink. The only real value lies in the work and improvements generated by the work of the individual. There have been few admissions or public information released on who actually holds controlling stock in the FRB(s) of the world. It’s not a conspiracy, it’s just “business”. It’s not necessary a bad system if it’s administered with honesty and integrity. Any banking system can work if it’s run by honest people. It’s when the stock holders of the bank forget or ignore who’s money and labor they are holding that things tend to go south in a hurry. The president appointed governing board is responsible for making decisions related to when, if and how the US _uses_ the FRB, not for the daily operation of the FRB itself. The announcements about the FED raising or lowering the interest rate are only partly correct. Interest rate calculations and requests are presented to the board of directors for approval before they are enacted, but the BOD can easily override the recommendation of the Reserve Banking System Governing Board and has before. And this basic strategy is used the world over. Did you see the list [HERE](http://www.reserve-bank.com/cb.htm) The 1913 constitutional amendment was to ALLOW the US government to set up it’s own bank due in part to gross disorganization in the banking industry. After ‘_the big one_’ in 1929 the government was considered incapable of operating a bank and a second amendment was enacted that separated the government from banking. The predominant fear being we’d end up back in a monarchy like those our ancestors fled in England, France, Germany, Italy, Russia etc. Since even bank officials like their heads on their bodies it wasn’t difficult to convince enough congressman to push the amendment. If you’ve ever read the congressional minutes for the period it’s curious to note both the timing and the way the actual amendment was ratified. I think it was just hours before the congress recessed for the season if I recall correctly. I think the intent was to get it passed quietly so there was not too much opposition by those who would misunderstand it’s intent. Read a bit of history beyond the pubic propaganda and Wiki hype and you discover many interesting things. Relying on an advertising agency like Google, Yahoo, MSN, Fox, CNN, TNT etc. or a public Wiki for all your information is at the very least, uninformative. -Tom ---
**Author:** ![siggma](https://avatars.discourse-cdn.com/v4/letter/s/da6949/32.png) [@siggma](https://boards.straightdope.com/u/siggma)\ **Post date:** [November 30, 2008, 3:09am UTC](https://boards.straightdope.com/t/questions-about-the-federal-reserve/474928/10 "2008-11-30T03:09:38Z")
> [@IAmNotSpartacus](#): > > The Fed is a quasi-government agency. It is most certainly not a private entity. And Fort Knox if filled with Gold! -Tom ---
**Author:** ![MEBuckner](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/mebuckner/32/2896_2.png) [@MEBuckner](https://boards.straightdope.com/u/MEBuckner)\ **Post date:** [November 30, 2008, 3:20am UTC](https://boards.straightdope.com/t/questions-about-the-federal-reserve/474928/11 "2008-11-30T03:20:42Z")
Two “constitutional amendments” were enacted in 1913; the 16th Amendment (providing for an income tax) and the 17th Amendment (providing for direct election of U.S. Senators). Neither had anything to do with the creation of the Federal Reserve System, which was done by an act of Congress, not by a constitutional amendment. ---
**Author:** ![siggma](https://avatars.discourse-cdn.com/v4/letter/s/da6949/32.png) [@siggma](https://boards.straightdope.com/u/siggma)\ **Post date:** [November 30, 2008, 3:23am UTC](https://boards.straightdope.com/t/questions-about-the-federal-reserve/474928/12 "2008-11-30T03:23:47Z")
From the wikipedia article titled: [Federal Reserve System](http://boards.straightdope.com/sdmb/newreply.php?do=postreply&t=495173) > [@](#): > > The Federal Reserve System (also the Federal Reserve; informally The Fed) is the central banking system of the United States. Created in 1913 by the enactment of the Federal Reserve Act, it is a quasi-public (government entity with private components) banking system[1] composed of (1) the presidentially appointed Board of Governors of the Federal Reserve System in Washington, D.C.; (2) the Federal Open Market Committee; (3) twelve regional Federal Reserve Banks located in major cities throughout the nation acting as fiscal agents for the U.S. Treasury, each with its own nine-member board of directors; (4) numerous private U.S. member banks, which subscribe to required amounts of non-transferable stock in their regional Federal Reserve Banks; and (5) various advisory councils. As of February 2006, Ben Bernanke serves as the Chairman of the Board of Governors of the Federal Reserve System. AND > [@](#): > > **Lender of last resort** > > ``` > Further information: Lender of last resort > > ``` > > The Federal Reserve has the authority and financial resources to act as “lender of last resort” by extending credit to depository institutions or to other entities in unusual circumstances involving a national or regional emergency, where failure to obtain credit would have a severe adverse impact on the economy.[15] > > Through its discount and credit operations, Reserve Banks provide liquidity to banks to meet short-term needs stemming from seasonal fluctuations in deposits or unexpected withdrawals. Longer term liquidity may also be provided in exceptional circumstances. The rate the Fed charges banks for these loans is the discount rate (officially the primary credit rate). > > In making these loans, the Fed serves as a buffer against unexpected day-to-day fluctuations in reserve demand and supply. This contributes to the effective functioning of the banking system, alleviates pressure in the reserves market and reduces the extent of unexpected movements in the interest rates.[16] > > For example, on September 16, 2008, the Federal Reserve Board authorized an 85 billion dollar loan to stave off the bankruptcy of international insurance giant American International Group (AIG) Who said the “FRB does not loan money to the US treasury”? There is even an index on the Wiki… ---
**Author:** ![siggma](https://avatars.discourse-cdn.com/v4/letter/s/da6949/32.png) [@siggma](https://boards.straightdope.com/u/siggma)\ **Post date:** [November 30, 2008, 3:50am UTC](https://boards.straightdope.com/t/questions-about-the-federal-reserve/474928/13 "2008-11-30T03:50:08Z")
> [@MEBuckner](#): > > Two “constitutional amendments” were enacted in 1913; the 16th Amendment (providing for an income tax) and the 17th Amendment (providing for direct election of U.S. Senators). Neither had anything to do with the creation of the Federal Reserve System, which was done by an act of Congress, not by a constitutional amendment. It had to be a constitutional amendment. The original constitution forbid the government from any banking whatsoever. There is so much other hype on the internet regarding the Constitution and Banking that it’s difficult to separate factual documents from politically motivated dogma. Look back further in history to when the Federal Reserve Act was initially written and you’ll find the initial constitutional amendment. I’m too lazy to go find it at the moment since there’s literally hundreds of pages of index alone and it might not have been digitized yet. You’ll probably have to search the Congressional Library to find the actual session minutes. If you feel so inclined a search could begin here [http://catalog.loc.gov/](http://catalog.loc.gov/) but it won’t change the current situation. -Tom ---
**Author:** ![MEBuckner](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/mebuckner/32/2896_2.png) [@MEBuckner](https://boards.straightdope.com/u/MEBuckner)\ **Post date:** [November 30, 2008, 3:58am UTC](https://boards.straightdope.com/t/questions-about-the-federal-reserve/474928/14 "2008-11-30T03:58:02Z")
:dubious: Which constitutional amendment was it, then? There have been a grand total of twenty-seven of them (none more than a few paragraphs long); here is the text of the [first ten](http://www.archives.gov/exhibits/charters/bill_of_rights_transcript.html), and here are the [other seventeen](http://www.archives.gov/exhibits/charters/constitution_amendments_11-27.html). No need for any lengthy searches of any musty archives; a few pages of material is all. ---
**Author:** ![Exapno\_Mapcase](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/exapno_mapcase/32/1051_2.png) [@Exapno\_Mapcase](https://boards.straightdope.com/u/Exapno_Mapcase)\ **Post date:** [November 30, 2008, 4:12am UTC](https://boards.straightdope.com/t/questions-about-the-federal-reserve/474928/15 "2008-11-30T04:12:29Z")
Well, if it had to be a constitutional amendment, your case is lost, because it wasn’t. Here’s the [full text of the Constitution](http://constitutionus.com/). You can also search to confirm that your notion that “The original constitution forbid the government from any banking whatsoever.” is equally factually wrong. The word bank or any equivalent doesn’t appear in it. The rest of your posts are of equal null factual value. You’re new here so I’ll repeat what I said earlier. GQ is for factual information. If you want to argue that we should return to a gold standard or whatever your conspiracy theory requires you should start a thread in Great Debates. ---
**Author:** ![Colibri](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/colibri/32/1841_2.png) [@Colibri](https://boards.straightdope.com/u/Colibri)\ **Post date:** [November 30, 2008, 5:35am UTC](https://boards.straightdope.com/t/questions-about-the-federal-reserve/474928/16 "2008-11-30T05:35:21Z")
With apologies to the OP, given the turn this thread has taken it’s going to be best to move it to GD. I trust you will receive some factual information there related to your original questions in between the debunking of the misinformation **siggma** has been providing. Colibri General Questions Moderator ---
**Author:** ![2sense](https://avatars.discourse-cdn.com/v4/letter/2/e47774/32.png) [@2sense](https://boards.straightdope.com/u/2sense)\ **Post date:** [November 30, 2008, 6:20am UTC](https://boards.straightdope.com/t/questions-about-the-federal-reserve/474928/17 "2008-11-30T06:20:33Z")
> [@siggma](#): > > It had to be a constitutional amendment. The original constitution forbid the government from any banking whatsoever. Whether or not the federal government had the constitutional authority to charter a central bank was a subject of much controversy after the Constitution was ratified. The [First Bank of the United States](http://en.wikipedia.org/wiki/First_Bank_of_the_United_States) was chartered in 1791 during President Washington’s first term. It was supported by the Hamiltonian Federalists and opposed by the Jeffersonian Republicans. When the Federalist Party fell by the wayside the bank charter was allowed to expire but the Republicans later found themselves in the uncomfortable situation of adopting Hamilton’s arguments in favor of constitutionality when they chartered the [2nd Bank of the United States](http://en.wikipedia.org/wiki/Second_Bank_of_the_United_States). The idea was still controvertial and lead to the landmark decision in [McCulloch v Maryland](http://en.wikipedia.org/wiki/McCulloch_v._Maryland) that the Constitution grants [implied powers](http://en.wikipedia.org/wiki/Implied_powers) to the Congress in order to carry out its [express powers](http://www.usconstitution.net/const.html#A1Sec8). ---
**Author:** ![siggma](https://avatars.discourse-cdn.com/v4/letter/s/da6949/32.png) [@siggma](https://boards.straightdope.com/u/siggma)\ **Post date:** [November 30, 2008, 8:03am UTC](https://boards.straightdope.com/t/questions-about-the-federal-reserve/474928/18 "2008-11-30T08:03:31Z")
> [@2sense](#): > > Whether or not the federal government had the constitutional authority to charter a central bank was a subject of much controversy after the Constitution was ratified. The [First Bank of the United States](http://en.wikipedia.org/wiki/First_Bank_of_the_United_States) was chartered in 1791 during President Washington’s first term. It was supported by the Hamiltonian Federalists and opposed by the Jeffersonian Republicans. When the Federalist Party fell by the wayside the bank charter was allowed to expire but the Republicans later found themselves in the uncomfortable situation of adopting Hamilton’s arguments in favor of constitutionality when they chartered the [2nd Bank of the United States](http://en.wikipedia.org/wiki/Second_Bank_of_the_United_States). The idea was still controvertial and lead to the landmark decision in [McCulloch v Maryland](http://en.wikipedia.org/wiki/McCulloch_v._Maryland) that the Constitution grants [implied powers](http://en.wikipedia.org/wiki/Implied_powers) to the Congress in order to carry out its [express powers](http://www.usconstitution.net/const.html#A1Sec8). Thank you, I stand corrected. I need to read more history myself. I may have been mistaking an act of congress for an amendment. Government banking was then and still is controversial. I missed pointing out that the Federal Reserve _System_ is not the Federal Reserve _Bank_. The FRB serves the FRS by providing financial and consulting services. I recall watching a NOVA show about the issue. As for Libertarians, there seems no satisfaction beyond death… -Tom ---
**Author:** ![Exapno\_Mapcase](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/exapno_mapcase/32/1051_2.png) [@Exapno\_Mapcase](https://boards.straightdope.com/u/Exapno_Mapcase)\ **Post date:** [November 30, 2008, 3:30pm UTC](https://boards.straightdope.com/t/questions-about-the-federal-reserve/474928/19 "2008-11-30T15:30:07Z")
> [@siggma](#): > > I missed pointing out that the Federal Reserve _System_ is not the Federal Reserve _Bank_. The FRB serves the FRS by providing financial and consulting services. You should continue to have missed. There is no such thing as the Federal Reserve Bank. There are twelve regional Federal Reserve Banks and they comprise the Federal Reserve System. They’re the banks that actually operate and move money to and from individual member banks. They do provide financial and consulting services, but you’d kinda expect that of a central bank. The FRS and the FRBs are inseparable and indistinguishable. You’re providing further blatant misinformation. > [@](#): > > I recall watching a NOVA show about the issue. > [@](#): > > Read a bit of history beyond the pubic propaganda and Wiki hype and you discover many interesting things. Relying on an advertising agency like Google, Yahoo, MSN, Fox, CNN, TNT etc. or a public Wiki for all your information is at the very least, uninformative. We’re beyond irony at this point. ---
**Author:** ![DubsyUin](https://avatars.discourse-cdn.com/v4/letter/d/eb9ed0/32.png) [@DubsyUin](https://boards.straightdope.com/u/DubsyUin)\ **Post date:** [November 30, 2008, 8:44pm UTC](https://boards.straightdope.com/t/questions-about-the-federal-reserve/474928/20 "2008-11-30T20:44:01Z")
> [@misterW](#): > > 1. Is the federal reserve in some way responsible for the current financial crisis by allowing banks to make loans to people with poor credit? In what fashion does the reserve regulate this sort of thing? I would argue that the federal reserve policies from the nineties till now were PART (and let me emphasis “part” as I learned from past threads) of what caused the situation we’re facing. One of the goals, as I see it, of the fed is to damper the affects of business cycles (which Austrians believe are created by the fed but that is an aside). It uses its various tools to try and manipulate loaning and spending in order to try and create steady and healthy GDP growth, usually between 2-4% if I remember correctly. Well, long story short, low federal funds rates instituted due to the 9/11 crash created low long term interest rates, which influence mortgage rates. Money became cheap. This environment created by the fed, in conjunction with crap lending standards, shady practices by the lending industries,federal government belief in “every American deserves a home” and policies originating from this mindset, and redistribution of risk through investment tools, created the mess we are in today. This is off of the top of my head. Feel free to comment. [Next page](https://boards.straightdope.com/t/questions-about-the-federal-reserve/474928.md?page=2)