Thursday, March 28, 2013

Is The Federal Reserve System Federal?

"The Fed"
In Banker Jekyll Will Hyde Your Money - 2 Dredd Blog answered the question based on a federal case involving a FOIA request directed to "The Fed."

Another way to tell if an entity is federal, state, or private is federal statutes and court jurisdiction of those statutes and entities.

Under the Eleventh Amendment, the States cannot be sued in federal courts without their consent, and federal entities have the statutory right to have their cases heard in federal court if they choose to.

Concerning its employees, Federal Reserve System entities can even require that a state's workmen compensation laws be litigated in federal court should that Federal Reserve entity choose to do so:
This appeal raises a question of first impression regarding a Federal Reserve Bank's entitlement to proceed in federal court even where diversity jurisdiction does not exist and the underlying dispute involves so peculiarly a creature of state law as a state worker's compensation statute. Appellant Federal Reserve Bank of Atlanta ("Federal Reserve") initiated this case by filing a "Petition for Determination of Disputed Claim for Worker's Compensation Benefits," seeking a declaratory judgment determining its liability under Alabama's worker's compensation statute to Appellee Robert R. Thomas, a Federal Reserve employee who allegedly injured his back on the job. The Federal Reserve claimed federal subject matter jurisdiction on the basis of 12 U.S.C. § 632, which creates federal jurisdiction over "all suits of a civil nature at common law or in equity to which any Federal Reserve Bank shall be a party." Thomas moved to dismiss, arguing that the dispute belonged in the Alabama state courts. The district court granted the motion, finding that section 632 was inapplicable because the Federal Reserve's cause of action was statutory and therefore was not a suit "at common law or in equity." As alternative grounds for dismissal, the court exercised its discretion to abstain in favor of a related case that Thomas had filed in state court, and also exercised its discretionary authority to decline to hear declaratory judgment suits.

The Federal Reserve now appeals, arguing that the district court's purported "literal" reading of the language of section 632 fails to take account of traditional interpretations of the phrase "all suits of a civil nature at common law or in equity." Moreover, asserts the Federal Reserve, dismissing this action in favor of Thomas's later-filed lawsuit in state court was an abuse of discretion, because under section 632 the Federal Reserve has the absolute right to remove that suit at any time before trial. We agree that the Federal Reserve was entitled to pursue this lawsuit in federal court, and therefore reverse the order of dismissal and direct the district court to reinstate the Federal Reserve's action.
(Fed. Reserve Bank of Atlanta v. Thomas, 220 F.3d 1235 (11th Cir. 2000), emphasis added). Another way to determine if an entity is federal, state, or private, is to ask and answer the question: "who created the entity?"

In that context, the federal government can only create federal entities, the states can only create state entities, and private individuals create private entities.

The Federal Reserve System was created by:
The Federal Reserve Act (ch. 6, 38 Stat. 251, enacted December 23, 1913, 12 U.S.C. ch.3) is an Act of Congress that created and set up the Federal Reserve System, the central banking system of the United States of America, and granted it the legal authority to issue Federal Reserve Notes (now commonly known as the U.S. Dollar) and Federal Reserve Bank Notes as legal tender. The Act was signed into law by President Woodrow Wilson.
(Wikipedia, emphasis added). That says the Federal Reserve System is federal, so let's hear from the entity itself, explaining itself:
The Federal Reserve System fulfills its public mission as an independent entity within government. It is not "owned" by anyone and is not a private, profit-making institution.

As the nation's central bank, the Federal Reserve derives its authority from the Congress of the United States. It is considered an independent central bank because its monetary policy decisions do not have to be approved by the President or anyone else in the executive or legislative branches of government, it does not receive funding appropriated by the 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 the Congress, which often reviews the Federal Reserve's activities and can alter its responsibilities by statute. Therefore, the Federal Reserve can be more accurately described as "independent within the government" rather than "independent of government."
(Who owns the Federal Reserve?). You might want to notice that the URL of that link has a ".gov" ending, which only government, not private, entities may use.

Thus, "The Fed" is a federal entity, yet there is still today a lot of folklore out there which imagines that "The Fed" is a private entity, so let's take a look at their position:
The long-time Chairman of the House Banking and Currency Committee (Charles McFadden) said on June 10, 1932:
Some people think that the Federal Reserve Banks are United States Government institutions. They are private monopolies …
And congressman Dennis Kucinich said:
The Federal Reserve is no more federal than Federal Express!
(Stunning Facts, Washington's Blog). Those two questionable sources set forth the astounding gist of the argument -- that since The Fed performs badly, by favoring the 1% over the 99%, it can't be a government entity.

That it is mastered by plutocrats, like the lobbyists who master congress, does not change "the stripes of the tiger" from federal to private.

That the Pentagon is controlled by the weapons industries does not convert the military from a government entity into a private entity.

Notice also the Dredd Blog concept of The Epigovernment (see Epigovernment: The New Model, Epigovernment: The New Model - 2, Epigovernment: The New Model - 3).

Even though the federal government (including "The Fed") is a level below the epigovernment, it is still federal.

The epigovernment is composed of "non-governmental entities", but that does not change the fact that a president is a federal president, a senator is a federal senator, and a House of Representatives member is a federal congress member.

Whether government entities are "controlled" by private entities or not, because they need the big bucks to win an election (which the 1% provide), does not change the fact that they are, non-the-less, still federal entities.

The black slaves did not become white because they were controlled by white slave owners, prostitutes don't become pimps because they are controlled by pimps.

The belief that The Fed is a private entity because it is controlled by the 1% private plutocracy is a nonsensical rhetorical game (MOMCOM: The Private Parts - 4) which won't solve what is wrong with The Fed (UPDATE):
When it bursts, there will be no new round of bailouts like the ones the banks got in 2008. Instead, America will descend into an era of zero-sum austerity and virulent political conflict, extinguishing even today’s feeble remnants of economic growth.

THIS dyspeptic prospect results from the fact that we are now state-wrecked. With only brief interruptions, we’ve had eight decades of increasingly frenetic fiscal and monetary policy activism intended to counter the cyclical bumps and grinds of the free market and its purported tendency to underproduce jobs and economic output. The toll has been heavy.
Instead, the White House, Congress and the Fed, under Mr. Bush and then President Obama, made a series of desperate, reckless maneuvers that were not only unnecessary but ruinous.
Without any changes, over the next decade or so, the gross federal debt, now nearly $17 trillion, will hurtle toward $30 trillion and soar to 150 percent of gross domestic product from around 105 percent today. Since our constitutional stasis rules out any prospect of a “grand bargain,” the nation’s fiscal collapse will play out incrementally, like a Greek/Cypriot tragedy, in carefully choreographed crises over debt ceilings, continuing resolutions and temporary budgetary patches.
(Sundown in America, by David Stockman). David Stockman was the Budget Czar for the Ronald Reagan administration, who resigned under protest.

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