> Some observers mistakenly consider the Federal Reserve to be a private entity because the Reserve Banks are organized similarly to private corporations. For instance, each of the 12 Reserve Banks operates within its own particular geographic area, or District, of the United States, and each is separately incorporated and has its own board of directors. Commercial banks that are members of the Federal Reserve System hold stock in their District's Reserve Bank. However, owning Reserve Bank stock is quite different from owning stock in a private company. The Reserve Banks are not operated for profit, and ownership of a certain amount of stock is, by law, a condition of membership in the System. In fact, the Reserve Banks are required by law to transfer net earnings to the U.S. Treasury, after providing for all necessary expenses of the Reserve Banks, legally required dividend payments, and maintaining a limited balance in a surplus fund.
https://www.federalreserve.gov/faqs/about_14986.htm
The Federal Reserve's audited annual financial statements are here: https://www.federalreserve.gov/aboutthefed/audited-annual-fi...
For example, here is the list of state member banks supervised by the Federal Reserve Bank of Richmond: https://www.richmondfed.org/banking/banker_resources/applica...
The member banks with $10 billion or less of total consolidated assets receive the 6% dividend. The ones with over $10 billion of total consolidated assets receive a dividend matching the high yield of the 10-year Treasury note (capped at 6%). The yield is 2.755% as of the most recent auction.*
* https://www.treasurydirect.gov/instit/annceresult/annceresul...
can you tell me more about these?
> 1. Stockholder Dividends
>> A. Dividend Amount. After all necessary expenses of a Federal reserve bank have been paid or provided for, the stockholders of the bank shall be entitled to receive an annual dividend on paid-in capital stock of--
>>> i. in the case of a stockholder with total consolidated assets of more than $10,000,000,000, the smaller of--
>>>> I. the rate equal to the high yield of the 10-year Treasury note auctioned at the last auction held prior to the payment of such dividend; and
>>>> II. 6 percent; and
>>> ii. in the case of a stockholder with total consolidated assets of $10,000,000,000 or less, 6 percent.
>> B. Dividend Cumulative. The entitlement to dividends under subparagraph (A) shall be cumulative.
>> C. Inflation Adjustment. The Board of Governors of the Federal Reserve System shall annually adjust the dollar amounts of total consolidated assets specified under subparagraph (A) to reflect the change in the Gross Domestic Product Price Index, published by the Bureau of Economic Analysis.
https://www.federalreserve.gov/aboutthefed/section7.htm
The most recent change was made in 2016: https://www.federalreserve.gov/newsevents/pressreleases/bcre...
https://www.federalreserve.gov/aboutthefed/appendix-b-divide...
I googled "fed dividends" without quotes. You'll also find other results on page 1 of the search detailing how this works.
The Federal Reserve Banks are not a part of the federal government, but they exist because of an act of Congress. Their purpose is to serve the public. So is the Fed private or public?
The answer is both. While the Board of Governors is an independent government agency, the Federal Reserve Banks are set up like private corporations. Member banks hold stock in the Federal Reserve Banks and earn dividends. Holding this stock does not carry with it the control and financial interest given to holders of common stock in for-profit organizations. The stock may not be sold or pledged as collateral for loans. Member banks also elect six of the nine members of each Bank's board of directors.
Yes, both of them have some weird technical legal arrangements in theory, but they both do the bidding of their political overlords in practice. And the acts that brought them into existence could be changed at will.
The official legal Fed shareholders are more comparable to bondholders in other companies. Even the dividend on those shares is fixed, much more like a bond.
When the Fed was first established, there were some rather peculiar political circumstances around, and those circumstances demanded a peculiar compromise in the way the Fed is structured.
More than a century later, political circumstances have changed a lot, but the strange structure of the Fed stuck around as an artifact that was never annoying enough for anyone to bother cleaning up.
It's the legal equivalent of old crufty code that nevertheless does its job and doesn't get in the way, so why touch it?