A1: No. Congress turned over the power to issue currency to a contracted central bank in 1913. The Federal Reserve Act grants 12, privately owned banks the exclusive right to print all U.S. legal tender.

 

The process works like this:

 

First, the government sells bonds to raise spendable capital. The Fed buys all the government bonds the general public, to include other governments, does not buy. To accomplish this, the Federal Reserve Bank writes a "check" to buy the notes from the Treasury. This "check" is not a check in the normal sense, it is a simple accounting entry registered with the U.S. Treasury. In other words, there is no backing collateral for the check residing in a bank account, it is best called "new currency" or "freshly printed money," as is effectively created on the spot, by the powers granted to the private member banks in the 1913 Federal Reserve Act.

 

Next, by calling these "purchased" bonds new banking reserves, the bonds are used as collateral for all U.S. banking institutions, so they may create nine or more equivalent interest bearing notes via normal bank function. In this very real sense, the national debt is approximately ten times the advertised amount which only includes interest due on the fraction owed directly to the Federal Reserve, but the people also owe interest on the additional currency created via normal fractional reserve banking.

 

The currency that the Federal Reserve created on the spot, and gave to the Treasury in exchange for the bond, is accounted for in the national debt, as borrowed with interest due the owner of the note, the Federal Reserve banks. It is then spent by the government. This is the sole source of the macro economic phenomenon called monetary "inflation." The larger pool of monetary currency, the less each unit of currency is worth.

 

The currency that commercial banking institutions created created on top of the Fed's bond collateral, is the source of all the bank loans made to businesses and individuals around the world and carried on the books.

 

A basic "follow-the-money" flow of monetary instruments is:

 

Government Debt --> Securities Asset --> Federal Reserve Check --> Government Deposit --> Government Check -->Commercial Bank Deposit --> Bank Reserves --> Excess Reserves --> Bank Loans --> Bank Currency --> People's Money Supply

 

It boils down to this:

 

The Federal Reserve's sole function is to sell freshly printed government spending money to finance whatever budget deficit the U.S. Congress wishes to run. They call this a loan, with both fees and interest due. The new currency issue dilutes the total currency pool, devaluing previously existing currency a precisely corresponding amount.

 

The people pay for the new currency issue via a hidden tax on everything, known as inflation.

 

The Fed accrues interest and fees on the new currency.

 

Congress is allowed access to any amount of additional funds it wants to spend without overtly raising taxes. [Answer submitted on Jul 8, 2008 10:26 AM]

Tips: Be clear. No one-word answers and don't use abbreviations that readers may not be familiar with. Reference the text of the bill or other articles when possible. Don't be inflammatory- it will be edited out!

A1: Private. It was created/authorized by the government with the Federal Reserve Act in 1913, but is not managed by nor accountable to the government. [Answer submitted on Sep 28, 2008 1:18 PM]

Tips: Be clear. No one-word answers and don't use abbreviations that readers may not be familiar with. Reference the text of the bill or other articles when possible. Don't be inflammatory- it will be edited out!

A1: The FDIC essentially has an unlimited line of credit to the Treasury, so no in the short run. In the long run, if the FED cannot supply borrowed money to the treasury to pay the FDIC bills, then possibly. [Answer submitted on Oct 1, 2008 7:33 AM]

A2: If there were no FED, as this bill aims to see, then all FDIC insurance would come directly from the national budget controlled by the Treasury, and if I'm not mistaken, those funds would be borrowed from the American people, or from their general fund, instead of the FED. [Answer submitted on Oct 8, 2008 8:30 AM]

Tips: Be clear. No one-word answers and don't use abbreviations that readers may not be familiar with. Reference the text of the bill or other articles when possible. Don't be inflammatory- it will be edited out!