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Are The 12 Regional Banks Of The Fed Private Entities?

Submitted by Lars Schall or,

Related to a book that I’m writing in German, I was asking myself whether the 12 regional Federal Reserve banks are privately owned.

The US Supreme Court, I found out, said this on January 3, 1928 in the case “United States Shipping Board Emergency Fleet Corporation v. Western Union Telegraph Co.“:

Instrumentalities like the national banks or the federal reserve banks, in which there are private interests, are not departments of the government. They are private corporations in which the government has an interest. Compare Bank of the United States v. Planters’ Bank, 9 Wheat. 904, 907, 6 L. Ed. 244.

See here for yourself.

Connected to the Freedom of Information Act (FOIA) case “Bloomberg LP v. Board of Governors of the Federal Reserve System, 08-CV-9595, U.S. District Court, Southern District of New York (Manhattan)“, Bloomberg reported in May 2009:

The New York Fed is one of 12 regional Federal Reserve banks and the one charged with monitoring capital markets. It is also managing $1.7 trillion of emergency lending programs. While the Fed’s Washington-based Board of Governors is a federal agency subject to the Freedom of Information Act and other government rules, the New York Fed and other regional banks maintain they are separate institutions, owned by their member banks, and not subject to federal restrictions.

See here for yourself.

In connection to the same FOIA case, Yvonne Mizusawa, Senior Council of the Board of Governors of the Federal Reserve System, stated on January 11, 2010 that the regional banks of the Federal Reserve System are indeed “private banks“.

See here for yourself.

Moreover, I’ve asked today Nomi Prins, the author of the book “All the Presidents’ Bankers“, the following:

Do you think it is right to say that the Federal Reserve System includes private member banks, which receive a 6% dividend for their shares from the profits that the regional fed banks are making on their market operations?

Nomi Prins responded:

As I understand Section 7 of the Federal Reserve Act, that is the case. Stockholders, or member banks, of the Federal Reserve System are entitled to receive a 6% per annum dividend on their paid-in capital stock, and any surplus fund can be used to pay dividends in the event that any year’s current earnings of the Federal Reserve System are insufficient to cover funds for that year.

See the early 1922 letter from its General Counsel, here:

The material portions of Section 7 of the Federal Reserve Act read as follows:


“After all necessary expenses of a Federal reserve bank have been paid or provided for, the stockholders shall be entitled to receive an annual dividend of six per centum on the paid-in capital stock, which dividend shall be cumulative. After the aforesaid dividend claims have been fully met, the net earnings shall be paid to the United States as a franchise tax except that the whole of such net earnings, including those for the year ending December thirty-first, nineteen hundred and eighteen, shall be paid into a surplus fund until it shall amount to one hundred per centum or the subscribed capital stock of such bank, and that thereafter ten per centum of such net earnings shall be paid into the surplus.


“…Should a Federal reserve bank be dissolved or go into liquidation, any surplus remaining, after the payment of all debts, dividend requirements as hereinbefore provided, as the par value of the stock, shall be paid to and become the property of the United States and shall be similarly applied.”

See here.

As additional information on the dividends, the law requires dividends are paid to reserve member banks, before the Fed transfers any excess earnings to the Treasury Dept. as interest on Federal Reserve notes, (see p 398 of the Fed’s 2013 annual report)…It should be noted that the amounts aren’t huge, for 2013, annual dividends were $1.65 billion.

See here.

Update – July 10, 2014:

On the same day, I wrote this e-mail to some people at the press office of the New York Fed:

Dear Ladies and Gentlemen,
I am a financial journalist from Germany. Related to this article, I would like to know whether the NY Fed pays local property tax, and if it doesn’t, on what ground does it claim exemption?

Moreover, may I ask you whether the NY Fed sees itself as a private entity as suggested in its response to the FOIA case “Bloomberg LP v. Board of Governors of the Federal Reserve System, 08-CV-9595, U.S. District Court, Southern District of New York (Manhattan)“? You find the quote to which I’m referring in the article above.

Furthermore, how does the NY Fed respond to the statement by Yvonne Mizusawa, Senior Council of the Board of Governors of the Federal Reserve System, that the regional banks of the Federal Reserve System are “private banks“? See also in the article above, please.

Thank you very much for your attention!

Kind regards,
Lars Schall.

That e-mail was inspired by an idea that it might be worthwhile to check whether the regional Fed banks pay local property tax. After all, that was how Wright Patman established that the Board of Governors, in Washington, is a public entity. But I believe the same logic would apply to the regional banks.

I’ve arranged a PDF copy of a certain passage in William Greider’s book “Secrets of the Temple,” so that you can read for yourself that strange story about Wright Patman and the Fed’s headquarter building in Washington DC – see here. According to Patman, “constitutionally, the Federal Reserve is a pretty queer duck.”

Furthermore, I wrote yesterday an e-mail to US economist L. Randall Wray. In the book that I’ve mentioned, I quote Prof. Wray from an essay about the so called “independence” of the Federal Reserve, and specifically one sentence in the sense of this article:

“The Glass-Owen bill split the difference, with private ownership and a decentralized system, but with the Treasury Secretary and the Comptroller of the Currency sitting on the Board.”

With regards to this sentence, I’ve asked him: Where does the “private ownership” come from?

Prof. Wray replied by stating that I was “barking up the wrong tree” and pointing to a paper he co-authored. He added: “The Fed is a creature of congress. The ownership by member banks amts to getting a 6% return and some delegated fairly insignificant duties, which can be changed at any time by congress. The shares cannot be sold.”

Chris Powell, the press secretary of the Gold Anti-Trust Action Committee (GATA) in the US wrote me:

While the share structure of the Federal Reserve System is peculiar, this issue has always seemed to me to be of no point. The system was created by federal law and is a creature of government. OF COURSE the system, like the rest of government, contrives reasons not to be accountable to the public, and OF COURSE the system, like all other government agencies, is captured by the private interests it is supposed to regulate, and OF COURSE as a result it tends not to serve the public interest. But it remains a creature of government and the public, through its elected representatives, could take control of it any time the public could mobilize itself to do so.


“If the Federal Reserve Board was not a government agency, GATA could not have sued it under the Freedom of Information Act and won a federal court order for disclosure against it (and a court award for legal costs) a few years ago. And didn’t Bloomberg win its similar case against the New York Fed for the QE records?”

I’ve told Powell about the court ruling from March 19, 2010 by the United States Court of Appeals, Second Circuit – see here. It said:

“As the records of the Federal Reserve Bank of New York had not been searched, we need not decide here whether what may be found must be produced.”

Chris Powell replied: “Thanks for the resolution of the Bloomberg case. I think that settles the issue. The FOI Act applies only to government agencies.”

“All in all, nothing to see here, I guess…”, I thought.

I also saw then two more significant statements:

1) The Board and the Clearing House appeal only on the ground that a proper interpretation of FOIA Exemption 4 covers the requested material. No contest is made as to Exemption 5, or as to the scope of the Board’s (disputed) obligation to conduct a search of records at the Federal Reserve Bank of New York. Any argument that the Board had as to Exemption 5, or either side had as to the scope of the ordered search at the Federal Reserve Bank of New York is therefore deemed waived. Norton v. Sam’s Club, 145 F.3d 114, 117 (2d Cir.1998). Whether certain records of the twelve Federal Reserve Banks are records of the Board is an issue that is decided in an opinion-filed simultaneously with this opinion-in the appeal (heard in tandem with this appeal) from the Southern District’s decision in Fox News Network, LLC v. Board of Governors of the Fed. Reserve Sys., 639 F.Supp.2d 384 (S.D.N.Y.2009). See Fox News Network, LLC v. Bd. of Governors of the Fed. Reserve Sys, —F.3d —-, 2010 WL 986665 (2d Cir.2010).


2) The requests sought (in relevant part) detail about loans that the twelve Federal Reserve Banks made to private banks in April and May 2008 at the Discount Window and pursuant to ad hoc emergency lending programs (described in the margin )… The Board denied these requests (in relevant part) in December 2008. The Board conceded possession of records showing the loan information Bloomberg sought, with the exception of the collateral; collateral information is held by the lending Federal Reserve Banks. But the Board advised that the responsive information in its possession—contained in “Remaining Term Reports”–was exempt from disclosure under FOIA Exemptions 4 and 5. The Board did not search the lending records of the twelve Federal Reserve Banks, explaining that a request to the Board does not constitute a request for information held by those institutions.

Chris Powell then replied: “Yes. They can claim that the law exempts certain records from disclosure but they can’t claim that they are not a government agency or that they are not covered by the law.”

I asked Powell in a provocative manner: “Why not file a FOIA request re the NY Fed and the German gold? Perhaps, one could solve two issues at once…”

Powell: “That WOULD be an interesting one. One must remember that while GATA won its case against the Fed in a technical sense, the court still ruled that the Fed could keep all of its gold records except one. Among the records the Fed was allowed to keep secret were records of gold swaps with foreign banks.”

I asked: “Have you specifically asked for something re the NY Fed?”

“Yes”, he wrote back. “A few months ago I asked the New York Fed whether, as its former vice president said in a speech, the bank provided gold accounts to banks. Couldn’t get the publicist to answer and so wrote to Dudley, the NYFed president. Couldn’t get an answer there either and so wrote to my congressman and senators to ask them to bludgeon an answer out of the NYFed.

“Maybe a month after that I got a letter from an underling to Dudley contradicting the speech of the former NYFed vice president. See the middle of the speech here. And thenthis.”

If the NY Fed responds to my questions, I will let you know, although I wouldn’t expect anything; they’re not very good at answering my questions – as you can see for yourselfhere, for instance.

I will also let you know whether Yvonne Mizusawa, the Senior Council of the Board of Governors of the Federal Reserve System, has anything to add to her remarks that were brought forward in the Second Circuit Court of Appeals related to the FOIA cases “Fox News Network LLC v. Board of Governors of the Federal Reserve System” and “Bloomberg LP v. Board of Governors of the Federal Reserve System”. Today I sent a press inquiry to Michelle A. Smith, press secretary of the Washington-based Board of Governors, in order to ask her to forward it to Ms. Mizusawa, whom I made familiar with my e-mail to the NY Fed – and then added the following:

May I ask you on the record:

Why are the regional banks of the Federal Reserve System “private banks“?

How do they differ from other private banks?

Thank you for your attention!

Kind regards,
Lars Schall.

To be continued, I guess…

Update – July 11, 2014:

Thank You For Filling Out This Form

Shown below is your submission to on Friday, July 11, 2014 at 11:09:48

This form resides at

NAME: Lars Schall
YOUR POSITION: Financial Journalist
QUESTION: Press Inquiry Dear Ladies and Gentlemen, I haven’t been able to contact directly your press office. Related to a current research of mine, I would like to know whether the NY Fed pays local property tax, and if it doesn’t, on what ground does it claim exemption? Is this public information? Kind regards, Lars Schall.

What you’ve just read is an inquiry that I sent today to the tax department of the City of New York, after I had tried for 45 minutes to get in touch with its press office via phone.

I think, a Title Insurance Company could tell you the answer within 5 minutes. But, you would have to hire them and pay about $500 for the search. All they would need is the street address of the building.

In addition, pull this up, and then go to page 25, #12: Federal Reserve Bank of New York / 33 Liberty Street / Block 35 / Lot 1.

This is a register of all public buildings in NYC – hospitals; jails; fire halls; schools; etc. Public Buildings are exempt from real estate taxes. See here. All exemptions are listed there. Check out the specific exemption for: Federal property (see United States, property owned by). Other exemptions may apply. You would have to ask someone to research the building – the value (assessment) for real estate tax purposes is a matter of public record. If there is an exemption, the particular exemption will be stated on the “card” for that particular property: 33 Liberty Street / Block 35 / Lot 1.

The foregoing does not answer my questions, but provides a good guess that: This property is exempt from real estate taxes because it is classified as “Federal property”.

After he saw my inquiry re the NYC Department of Finance, Chris Powell wrote me:

“I’m sure that the New York Fed pays no local property taxes. But to resolve the issue of the government nature of the Fed and the regional Federal Reserve banks, it is necessary only to look at a dollar bill.


“On the front the bill says ’Federal Reserve Note’ on the top and then, just underneath, ’The United States of America.’ It is signed by the treasurer of the United States and the secretary of the treasury, both U.S. government officials. It carries the seal of a regional Federal Reserve bank; all the regional banks issue such notes. And it says: ’This note is legal tender for all debts, public and private.’ That is, the law — made by the government — is what gives value to Federal Reserve notes.


“On the back the bill carries the Great Seal of the United States.


“If the Fed and its regional banks were not government agencies, the dollar bill would look very different.”

And yet, we still have Yvonne Mizusawa saying officially on behalf of the Board of Governors of the Federal Reserve System: The regional banks of the Fed are not agencies, they are private banks.

I haven’t made this up.

After I had not seen any response from Ms. Smith coming my way with regards to my inquiry, I looked for Ms. Mizusawa’s e-mail address at the Fed – and I was successful. Therefore, I have been able to write her directly:

Dear Ms. Mizusawa,

my name is Lars Schall. I’ve tried yesterday to get in touch with you via Michelle A. Smith, press secretary of the Board of Governors of the FRS. I copy my inquiry below.

I hope this e-mail address that I just found in the web works.

I would appreciate a response from you very much!

Kind regards,

Lars Schall.

Then followed a copy of my original inquiry that I sent to Ms. Smith.

To be continued, I guess…


(1) “Federal Reserve Bank Governance and Independence during Financial Crisis”, published at Levy Economics Institute of Bard College, April 2014, here. You may also want to read an interview that I did with Randall Wray in the past: “Truths and Myths of the Federal Reserve”, published on May 6, 2010 here.

(2) The court ruling can be found here“The Federal Reserve System–the central bank of the United States–is composed of twelve regional Federal Reserve Banks and the defendant-appellee Board of Governors of the Federal Reserve System (“Board”) in Washington, D.C. The Board is a federal agency that (among other things) supervises the operations of the twelve Federal Reserve Banks. (…) As the district court concluded, not all lending records of the twelve Federal Reserve Banks necessarily become records of the Board. However, Board regulations provide that some records at the Federal Reserve Banks– those kept at the Federal Reserve Banks under certain conditions for “administrative reasons”–are records of the Board; these must be searched. We remand to the district court to order further searches and to determine if the fruits of those searches must be disclosed. The district court did not reach the question of whether the Board misconstrued the scope of the Fox News FOIA requests (the district court having ruled these documents would be [**6] exempt from disclosure in any instance); we remand for further consideration of that question as well.”

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