Is the Federal Reserve a Scam?

The Fed is Hemorrhaging Money

According to Federal Reserve data, for the first time in its history, the Fed has been losing money on a consistent monthly basis since September 28, 2022. As of the last reporting date of June 19, 2024, those losses add up to a cumulative $176 billion. As the chart above using Fed data shows, the losses thus far in 2024 have ranged from a monthly high of $11.076 billion in February to a low of $5.674 billion in May.

These losses are separate and distinct from the unrealized losses the Fed is experiencing on the debt securities it holds on its balance sheet. It does not mark those losses to market since it intends to hold the securities to maturity and their principal is guaranteed at maturity by the U.S. government.

The losses shown in the above chart are actual cash operating losses that result from the fact that the Fed is earning significantly less interest on its debt securities than the high rates of interest the Fed is paying out to depository banks on their reserves held at the Fed; to mutual funds on its reverse repo operations; and in dividend payments to the banks that are shareowners of the 12 regional Fed banks.

Federal Reserve Pays Banks Interest. Why?

The Fed explains the origination of this policy as follows on one of its website pages from 2008:

“The Financial Services Regulatory Relief Act of 2006 originally authorized the Federal Reserve to begin paying interest on balances held by or on behalf of depository institutions beginning October 1, 2011. The recently enacted Emergency Economic Stabilization Act of 2008 accelerated the effective date to October 1, 2008.”

A detail that goes missing in mainstream media reports on this generous payout by the Fed is that the Fed and banking system were able to survive for 95 years without the Fed paying any interest on bank reserves. The Fed began paying interest on reserves at a time when the megabanks on Wall Street were in the process of imploding during their self-inflicted financial crisis of 2008 and needed every handout they could conjure up from the Fed.

At the time Congress was pressured into passing this legislation by Wall Street sycophants, it was unaware that the Fed would be conducting three years of secret backroom bailout programs (2007-2010) that would eventually tally up to a cumulative $29 trillion, according to a detailed analysis by the Levy Economics Institute using data the Fed was eventually forced to release.

Who Runs the Fed?

Run by just five unelected bureaucrats, the Federal Reserve has the extraordinary ability to indebt the American taxpayer while simultaneously protecting the very institutions that contribute to its monumental balance sheet.

As of today, the Federal Reserve's balance sheet stands at an astronomical $6.98 trillion, a staggering 28 percent of the $25.3 trillion federal government debt. These unelected officials, who operate behind a veil of bureaucratic opacity, have expanded the Fed's balance sheet by $3 trillion in the past year alone, largely to bail out financial institutions that made reckless bets.

Here’s a breakdown of the key points:

  1. Wealth Transfer Mechanism: The Federal Reserve has become a tool for wealth transfer, benefiting the wealthy elite (the "one percent") while socializing the financial risks and losses to the broader public.

  2. Federal Reserve Structure: The Federal Reserve's balance sheet is a massive sum ($6.98 trillion) largely controlled by unelected officials.

  3. New York Fed’s Influence: The New York Fed has the largest balance sheet, attributed to its ownership by major banks like JPMorgan Chase, Citigroup, Goldman Sachs, and Morgan Stanley. This ownership structure is a conflict of interest, where these banks benefit from the Fed’s policies.

  4. Liability Distribution: The piece notes that the Federal Reserve Act requires member banks to hold a fraction of the Federal Reserve’s liabilities, but this amount is minimal compared to the actual liabilities. Specifically, member banks are only responsible for a small fraction (1.8%) of the total liabilities, shifting the remaining risk to taxpayers.

  5. Accountability: The critique extends to the lack of accountability for the Federal Reserve’s actions, questioning whether elected officials will address these issues in their oversight of the Federal Reserve, particularly during testimonies such as those given by Chairman Jerome Powell.

The Federal Reserve is unique in that it operates with the power to create money out of thin air—an ability exercised with the press of a button by the twelve regional Fed banks. Of these, the Federal Reserve Bank of New York is the largest, holding a balance sheet of $3.9 trillion, or 56 percent of the total Fed balance sheet. This is no accident; the New York Fed is privately owned by some of the most powerful and dangerous banks in America, including JPMorgan Chase, Citigroup, Goldman Sachs, and Morgan Stanley.

Dividend Rate to Bank Shareholders of Federal Reserve Regional Banks: 6 Percent

The highest interest rate of all paid by the Fed is the 6 percent dividend that the Fed pays to the member shareholder banks that own the 12 regional Fed banks. If those banks have assets of $10 billion or less, they receive the 6 percent dividend. Shareholder banks with assets larger than $10 billion receive a dividend which is the lesser of 6 percent or the yield on the 10-year Treasury note at the most recent auction prior to the dividend payment. How long has the 6 percent dividend rate been in effect? Since the creation of the Fed in 1913. In other words, during busts and bailouts, when the Fed has also been shoveling trillions of dollars in secret loans to its member banks, that 6 percent dividend has been protected.

Bank Shareholders Carry 0 Risk, 100% Reward

Despite their ownership stakes, these banks are shielded from the risks they pose. The Federal Reserve Act requires member banks to subscribe to capital stock in their regional Fed bank, but their liability for the Fed’s losses is capped at a fraction of the total liabilities. For the New York Fed, its shareholders—these very banks—are only liable for $42.6 billion of its $3.9 trillion in liabilities. Across all twelve regional Fed banks, member banks are responsible for merely 1.8 percent of the Federal Reserve’s total liabilities. The remaining 98.2 percent of the risk falls squarely on the shoulders of taxpayers.

This discrepancy reveals a deep structural flaw in the Federal Reserve's operations. If the Fed's balance sheet were to implode, it is the American taxpayer, not the member banks, who would bear the brunt of the financial fallout. This risk is not theoretical; it’s a real and present danger. The Federal Reserve’s current state of financial fragility hints at insolvency, a crisis that could potentially collapse the entire American banking system if exposed.

The danger of this situation is exacerbated by the lack of transparency and accountability in how the Federal Reserve operates. With five unelected bureaucrats wielding immense power, and a system that shields its private bank shareholders from substantial risk, the potential for a catastrophic economic event looms large.

It is imperative that this hidden crisis be brought to light. If a prominent figure or organization were to reveal the true extent of the Federal Reserve’s precarious financial state, it could trigger a run on banks and destabilize the entire financial system. As we navigate the aftermath of the pandemic and beyond, the American public deserves a full reckoning with the Federal Reserve's role in the economic framework and the enormous risks it poses.

In an era where economic inequalities are increasingly visible, it is critical to address the systemic issues within our financial institutions. The Federal Reserve, with its unchecked power and minimal accountability, represents a significant threat to our economic stability and fairness. It is time for a comprehensive review and reform to ensure that such an institution can no longer endanger the financial future of millions of Americans.

The American Financial System is a Scam

The American banking system exists to privatize profit and financial control of the United States through private multi-national banks in order to indebt We the People, the American taxpayer.

This financial system socializes losses and privatizes gains. It is wrong and it must be dismantled in order for God's Kingdom to flourish on earth.

Here’s a breakdown of these concerns and arguments for dismantling or reforming the current banking system:

  1. Privatization of Profits: Large multinational banks often benefit from significant profits, sometimes with little oversight or regulation, leading to substantial financial rewards for shareholders and executives.

  2. Socialization of Losses: During financial crises, such as the 2008 financial meltdown, taxpayers often bear the burden of bailing out failing banks, which can lead to public resentment and a sense of injustice.

  3. Debt and Taxpayer Burden: The financial system's reliance on debt can lead to increased national debt and economic burdens on taxpayers, raising concerns about long-term fiscal health and fairness.

  4. Control of Financial System: Large banks and financial institutions wield substantial influence over the financial system and policy, which some argue can lead to decisions that prioritize their interests over the public good.

  5. Systemic Risks: The interconnected nature of multinational banks means that problems in one institution can have widespread repercussions, potentially leading to systemic risks and economic instability.

  6. Ethical and Moral Concerns: Drawing a parallel to "Babylon," which historically symbolizes moral and economic excess, critics argue that the current financial system reflects similar values of exploitation and inequality.

Reforming or dismantling the current banking system would require addressing these issues, possibly through:

  • Public Banking: Exploring public banking options to focus on public welfare rather than profit.

  • Financial Reforms: Introducing reforms to better balance the risks and benefits of financial activities, ensuring that taxpayers are not disproportionately burdened.

  • Increased Regulation: Implementing stricter regulations to limit excessive risk-taking and ensure accountability.

  • Design a New Central Banking System: It is time to find an alternative to the current financial system of the United States.

The discussion around reforming the financial system is complex and multifaceted, involving economic, ethical, and policy considerations.

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