Jekyll Island Hunt Club

Jekyll Island Hunt Club

"We shall have no more financial panics.... Panics are impossible....Business men can now proceed in perfect confidence that they will no longer put their property in peril.... Now the business man may work out his destiny without living in terror of panic and hard times.... Panics in the future are unthinkable.... Never again can panic come to the American people. - Herbert Hoover"

Federal Reserve Facts

The Beginning of the Federal Reserve System

  1. The design for the Federal Reserve Bank was started in 1910 in a meeting that took place on Jekyll Island, Georgia.
  2. The FED was established by an act of Congress (The Glass-own bill also know as The Federal Reserve Act) on December 23rd, 1913. The Reserve Banks opened for business on November 16th, 1914. A majority of the Senate voted on the bill that passed. However debate was limited because of the impending holiday.
  3. The name was changed to the Federal Reserve System by the Banking Act of 1935. This act also reorganized the FED with respect to the number of directors and length of term.
  4. One of the selling points (compiled by Herbert Hoover) given to Congress for the passage of The Federal Reserve Act was that it would eliminate the business cycle.
  5. The Federal Reserve was establised as a private central bank. The shareholders were (and still are today) the major banks. The exact shareholdings are not public record. The creation of the central bank moved the responsibility for monetary policy from Congress to the FED.


The Federal Reserve System consists of three parts:

  1. The Federal Reserve Banks
  2. The Board of Governors
  3. The Federal Open Market Committee

The Federal Reserve Banks

  1. The Federal Reserve System consists of 12 districts each one located and serving 12 geographical regions of the country.
  2. Regional headquarters are located in Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas, and San Francisco. Additionally, there are Branches of Reserve Banks in 25 other cities.
  3. The 12 Regional Fed Banks are under the direction of the Federal Reserve board in Washington D.C.
  4. All national banks and thrifts are required to become members of the Federal Reserve System. State banks are not required to become members of the regional Fed Bank but may at their discretion.
  5. Each individual Reserve Bank is managed by a Board of Directors. Two thirds of these directors are elected by the privately owned commercial banks that are the member banks of the Federal Reserve System. The remaining one third of the board members are elected by the Fed Board of Governors in Washington. The board of each region elects a President for a five year term.
  6. Each of the individual Reserve Banks are organized as a private corporation and the shares of this corporation are sold to the private commercial national banks and thrifts that operate in the district.
  7. Shares in the regional Fed Reserve Banks are highly restricted. Each commercial member bank has the same number of shares as every other bank. These shares cannot be sold and the shares pay an annual 6% dividend.
  8. The Federal Reserve Banks have several functions: a) to clear checks b) provide and destroy currency (Federal Reserve Notes) C) research the regional economy which it publishes in the "Beige Book" d) provide economic education (or what some might call economic propaganda) e) establish economic policy f) approve bank mergers and acquisitions.
  9. The most important district bank is the Federal Reserve Bank of New York.
  10. The Federal Reserve System turns over its operating profits to the U.S. Treasury, after deducting all expenses, including the 6% dividend to member banks.

FED speak

"Each of the 12 Reserve Banks has a board of nine directors. Each Bank's president is appointed by its board of directors and approved by the Board of Governors in Washington, D.C. Reserve Bank directors oversee the operations of their Bank and are subject to the overall supervision of the Board of Governors. The nine directors of each Reserve Bank are evenly divided into three classes, designated A, B, and C. Class A directors represent commercial banks that are members of the Federal Reserve System. Class B and Class C directors represent the public interest and cannot be officers, directors, or employees of any bank. Class B and Class C directors encompass the broad economic interests of the District, including industry, agriculture, services, labor, consumers, and the nonprofit sector. Class A and Class B directors are elected by member commercial banks in the District. Class C directors are appointed by the Board of Governors." [ 1 ]

FED speak

"So who owns the Fed? Although it is set up like a private corporation and member banks hold its stock, the Fed owes its existence to an act of Congress and has a mandate to serve the public. So the most accurate answer may be that the Fed is "owned" by the citizens of the United States." [ 2 ]

Board of Governors

  1. The board of Governors is comprised of seven governors one of the governors is chairman or the board.
  2. The seven governors are appointed for a nonrenewable 14 year term.
  3. The chairman is appointed for a renewable 4 year term. There is no limit to the number of times the chairman can be re-appointed to chair the board of governors.
  4. The board has its own staff of economists that collect data for the boards and provide economic research.
  5. The board helps to set monetary policy by:
    1. Having all governors sit on the Federal Open Market Committee.
    2. Setting the reserve requirement for banks.
    3. Setting and approving the distrcit discount loan rates.

Federal Open Market Committee

  1. The Federal Open Market Committee (FOMC) is composed of twelve members:
    1. The seven governors.
    2. The President of the Federal Reserve Bank of New York.
    3. Four other district bank presidents (presidents who serve one year terms on a rotating basis).
  2. The committee typically meets every six weeks (eight times a year) to assess the condition of the economy and then vote on monetary policy. They decide to increase, decrease or maintain the growth of the money supply in the country.
  3. The FOMC controls economic policy by using one or more of three tools available to it;
    1. Changing the discount rate, which is the rate the FED charges banks to borrow from it.
    2. Changing reserve requirements, which is the percentage of deposits the banks must hold on reserve to cover all deposits (remember banks in the US practice fraction reserve banking).
    3. Buying or selling U.S. Treasury debt from it's member banks (which the FOMC euphemistically calls the 'open market')
  4. The FOMC also has the ability to grow the money supply (create money) in the U.S lending money to it's member banks.

[ 1 ]  From the Federal Reserve Bank of San Francisco

[ 2 ]  From the Federal Reserve Bank of Dallas