In The Federal Reserve under attack like never before, I referred to bankrate.com’s cheerleading piece for the Fed, 5 myths debunked about the Federal Reserve. Let’s take a look at what Mark Hamrick, the writer, calls Myth 1: The Fed is run by foreigners.
I’ve been in the precious metals business for forty years and I have long had an interest in the Fed and central banking. I thought I’d heard all the conspiracies about the Fed, but until I read Hamrick’s piece I’d never heard the Fed is run by foreigners.
I’ve heard that the Fed is “controlled” by foreigners but not run by it. To assert that the Fed is run by foreigners is ridiculous because the people who run are the Fed are Americans nominated by the President and confirmed by the Senate, just as Janet Yellen was recently made Ben Bernanke’s successor and will take office February 1, 2014.
Take a look at the fourteen men (and soon to be one woman) who have chaired the Fed. With the exception of Arthur Burns, all were born in the United States. Burns was born in the Austro-Hungarian Empire and immigrated to the US with his parents when he was nine years old. His surname was Burnseig, but was “Anglicized,” as often happened after immigrants arrived in the US.
Last the year the Bank of England, the United Kingdom’s central bank and the world’s second oldest central bank, selected Mark Carney, a Canadian and former head of Canada’s central bank, as its governor, which is what the BoE calls its top man. Carney’s appointment was not questioned at any level, which goes to show just how accepted is the concept of central banking. Generally, though, you can count on persons selected to head central banks to be citizens of the countries in which those central banks are located.
Now, is the Fed “controlled by foreigners?” To borrow from Bill Clinton, it depends on what you mean by “controlled.” Stock in the Fed is owned by its member banks and no one–but no one–gets appointed to the Fed’s Board of Governors without being approved of by the banking industry. And, I don’t mean by the local one-office banks but by the megabanks, many of which were recipients of billions of dollars from the Fed during 2008 World Financial Crisis.
But, who “controls” the Fed? Persons friendly to the banking industry, nearly all of which have had financial ties with big banks. Who appoints those persons? The large shareholders who control the banks, many of which are foreigners who want their interests looked after.
The Fed controlled by foreigners? It probably more accurate to say the Fed is greatly influenced by foreigners because today the world’s megabanks are so interlocked through shared loans, loan guarantees, loans to foreign corporations and derivatives that they look like octopuses in a group hug.
This “myth” appears to have been conjured solely to make Fed critics look ridiculous. It fails.
It is an understatement to say that concept of central banking is flawed. Central banking is dangerous, which is why the Fed’s supporters, many of which are compensated by beneficiaries of central banking, will go to extremes to defend the Fed and to conceal what central banks really do, which, when exposed, reveals the dangers of central banking.