October 17, 2019
How The Federal Reserve Works (And Who Really Owns It)

How The Federal Reserve Works (And Who Really Owns It)


The Federal Reserve: the cornerstone of the
American economy. For just over a century the Fed has overseen
the financial system of the US, but its track record has been far from perfect.
Worse yet, it has such a unique and convoluted structure that it’s very difficult for people
to really understand it, which is why unsurprisingly the Fed has been subject to various conspiracy
theories, from being owned by the Rothschilds to being operated by lizard people.
Today, we’re going back to the dawn of American finance to see how the Fed was created, how
it works and who really owns it. This video is brought to you by Skillshare,
where you can find a ton of different classes including my own series of videos on how the
stock market works. You can watch them for free by registering
with the link in the description. America during the late 19th century was a
nation in turmoil and not just in the literal sense.
The Civil War was no doubt devastating, but even during the peace that followed America
was plagued by frequent and deep economic depressions.
The underlying cause was simple: America just lacked a proper financial system and more
importantly, it didn’t have a central bank to save the day when things turned bad.
Now, keep in mind, central banking wasn’t a new concept.
The Dutch were the first to come up with a central bank in 1609 and it was instrumental
in transforming the Netherlands from a swampy backwater into a global economic empire.
Following the example of the Dutch, the English created the Bank of England in 1694, which
of course became the backbone of the British Empire.
But it’s exactly this association with the British that made the Founding Fathers reluctant
to use the same model in the United States. There were two attempts at establishing a
central bank even despite public opposition: Alexander Hamilton himself led the first movement
in 1791. But in both cases the systems lasted under
20 years and did little to stabilize the situation. And by all accounts the situation was very
very bad. Back then even a single local bank failing
could result in nationwide panics. People knew that no one could save their bank
if it went bust, so as soon as rumors of insolvency started spreading, everyone frantically started
withdrawing whatever they had, bankrupting otherwise healthy and solvent banks simply
out of fear. Such bank runs happened with frightening regularity
and the depressions that followed were long and painful.
Of course, American bankers realized very well just how bad their industry was doing.
Paul Warburg, one of the great American bankers of his day, said in 1907 that the American
banking system then was at about the same point as 15th century Italy or Babylon in
2,000 BC. Just a few months after Warburg made that
statement, the country suffered the Panic of 1907 and it was particularly severe.
To start things off, in 1906 a devastating earthquake destroyed 80% of San Francisco.
With reconstruction efforts underway, capital was very tight and because all the money back
then was in paper form it was much more difficult to reallocate it across the country.
One banker tried to abuse that by manipulating the stock price of the United Copper company
back on Wall Street. He hoped to see his shares rise exponentially
in value, but instead they crashed, dragging down the entire stock market with them.
That banker was involved in 10 different banks across the East Coast and one after another
these banks failed as people assumed they were insolvent and withdrew all their money.
Pretty soon even banks that had nothing to do with that guy were going under, and so
the fearful bankers of America turned to the only man with the power to save them: J. P.
Morgan. Back then, John Morgan was the king of Wall
Street, and even today the bank he created is the largest one in America.
He wasn’t the wealthiest man at the time, that title belonged to John Rockefeller, but
Morgan was certainly the man everyone turned to when things got bad.
In October 1907 Morgan summoned the great bankers of the day to his office at 23 Wall
Street. With the collective capital of America’s
big banks, Morgan arranged for the rescue of the healthy banks that were nevertheless
near bankruptcy due to irrational fears. Virtually the same thing would happen a century
later in 2008 when the government bailed out the banks, but this time it was happening
entirely thanks to private individuals like John Morgan.
Once the panic was contained, it became clear to everyone that a central bank was necessary
and Congress immediately passed legislation to create one.
However, that was pretty much the only thing everyone agreed on: the actual details of
how it would work sparked long and fierce debates that halted any progress.
The agricultural South, for example, was afraid that a powerful central bank would give Washington
and Wall Street too much power over them. The bankers meanwhile wanted to make sure
that the central bank would not be manipulated by political interests: they wanted it to
be as independent as possible from Washington. The sheer number of competing parties made
creating a central bank extremely difficult and negotiations would in fact take over 5
years to finalize. What’s interesting though, is that these
negotiations weren’t happening on Capitol Hill.
Instead, they were held 600 miles south of Washington on Jekyll Island in Georgia.
That resort was home to an exclusive club of over a hundred of the wealthiest men at
the time, including John Morgan. Of course, only a select few would help draft
the actual plan for the central bank and it wouldn’t be until 1913 that legislation
would actually come to pass. The newly created Federal Reserve was truly
a miracle of compromise. To accommodate all the various interests of
the diverse United States, the Fed became a central bank unlike any other in the world.
To begin with, it wasn’t even a single bank, instead it was a network of twelve regional
banks each governed by local bankers and businessmen. Some of these banks were in obvious places,
like New York and Chicago, but many of the other locations came down to politics.
The Senator from Missouri, for example, was a key vote needed to pass legislation, which
why today Missouri is the only state to have two federal reserve banks within its borders.
To appease Washington, these twelve regional banks would have a single governing body,
comprised of seven people appointed by the president and confirmed by the Senate.
To limit the president’s power, he can only appoint one governor every two years with
a 14-year term. But the really unique part of the Fed’s
structure, and you can thank John Morgan for that, is the fact that each regional bank
is actually structured as a private corporation that has its own stock.
Here’s how it works: every nationally-chartered bank in America is required by law to keep
6% of its capital in its regional reserve bank.
In exchange, that private bank receives an equivalent amount of shares in the regional
reserve bank. These shares, however, are quite different
from the shares of public companies. Their price is fixed at $100 per share and
they cannot be sold or traded. They carry voting rights to about two-thirds
of the Board of Directors for that regional reserve bank, but as we know the real power
is in the Board of Governors appointed by the President.
What these shares do have, however, is a fixed 6% dividend per year.
It’s worth noting that this dividend doesn’t entitle the banks to any the Fed’s profits.
Instead, everything the Fed earns above that 6% payout goes directly into the Treasury.
And keep in mind, the Fed is very profitable: in 2017 it sent $80 billion to the Treasury,
while only paying out $14 billion to the regular banks that hold its stock.
So who are the shareholders of the Federal Reserve?
Well, basically every big bank in America. The full list is 150 pages long, but pretty
much every name you know appears on it. But here’s the beautiful thing: most of
America’s big banks are public corporations. In other words, if you want to benefit and
make money off of the unique structure of the Federal Reserve you can do that by purchasing
stock in American banks. Since ownership in the Fed depends on capital,
the bigger the bank, the bigger its ownership stake.
Therefore, it would be wisest to start from the top of the list.
And speaking of the stock market, in case you somehow missed it last month I released
a 20-minute animated series of videos on how the stock market works on Skillshare.
I cover topics like how dividends get paid out or how ETFs work and if you want to watch
the full class you can register for a 2-month free trial of Skillshare using the link in
the description. Once you’ve registered, search for “investing
101” or follow the link I’ve left in the comments below.
If you don’t know, Skillshare is the best online learning platform out there.
It has thousands of different classes on a wide variety of topics, including business
and the stock market. By the way, I want to thank all 2,000 of you
who already watched my class: you’ve helped make it the most popular stock market class
on Skillshare and I’m thankful for that. In fact I’m already working on a second
series of videos that goes deeper into how companies work, including valuations, buybacks,
multi-class stocks and a whole bunch of other fascinating topics.
I’ll let you know when that course goes live, but until then make sure you’ve checked
out Skillshare and my one course on it. Anyway, thanks for watching.
If you’re new to Business Causal make sure to subscribe and also consider liking this
video if you enjoyed it. As always, a big shoutout to my patrons on
Patreon for supporting me and for being awesome. You’ll hear from me again in about two weeks
and until then, stay smart.

100 thoughts on “How The Federal Reserve Works (And Who Really Owns It)

  1. Banks are being thought of as intermediaries, but this not really what’s happening.

    they are creators of the money supply.

    Banks create money out of thin air, the empirical studies in the 5000 years history of banking, prove that

    Banks thought of as deposit-taking institutions, that lend money,, the legal reality is, banks don’t take deposits and banks don’t lend money.

    A deposit is not actually a deposit, a deposit iy is not a bailment, it is not held in custody.

    At law , the word deposit is meaningless. The law courts and various judgments have made very clear, if you give your money to a bank, even though, it’s ca;;ed a deposit, this money is simply a loan to the bank

    So, there is no such a thing as deposit.

    Banks borrow from the public

    Banks don’t lend money, banks are in the business of purchasing securities (the law is very clear about it)

    So when you want a loan, there’s the loan contract and you sign, at law. It’s very clear, you have issued a security, namely a promissory note and the bank is going to purchase that

    What the bank is doing is very different from what it presents to the public

    The bank purchases my promissory note, but how do I get my money…?

    The bank will say: you will find it in your account. That would be technically correct.

    If , they say, we will transfer to your account, that’s wrong, because no money is transferred at all.

    Why…? Because what we call a deposit is simply the bank’s record of its debt to the public.

    The bank also owes you money and its record of the money it owes you, is what you think you’re getting as money and that’s how the banks create the money supply

    The money supply consists to 97% of bank deposits and these are created out of nothing by banks when they lend money, because they invent fictitious customer deposits.

    Why..?

    Because , they simply restate slightly incorrectly in accounting terms, what is an accounts payable liability arising from the loan contract, having purchased your promissory note as a customer deposit but nobody has deposited any money

    So the baks create the mobey supply by inventing tjese claims on themselves, the ficticious deposits, that can be actually positive for ythe economy, as long as there’s money creation is in line with the cration of new goods and services, implementation of new technologies and therefore adding value in the economy is funded by this money creation if that happens, we ‘re ralking about business investment, productive loans, you will have no inflation and low inequality

    Germany is a case in point with over 1500 community banks who do not lend for speculative ends

    Lending f for consumption, you suddenly have more money created and more demand for goods but it’s the same amount of goods and services, so you are creating consumer price inflation

    In many countries , 70%++ of all lending, money creation for financial transactions, for asset transactions for purchasing ownerships rights, this is problem.

    Why..?

    Because the new money is created but new goods and services are not created

    So the are giving somebody new purchasing power over existing assets and therefore asset prices go up (property, land prices. This creates inequality

    Unproductive lending is dominant

    Where the money is going..? If for productive purposes, we will get a good economy. No inflation and financial stability and also no inequality problem

    Banks are not financial intermediaries, they are money creators

    We need new regulation in order to prevent acid bubbles and banking crisis which are all driven by this bank credit for financial transactions, it releases acid boom and it’s a game of musical chairs, you have to play it while the music is playing, which is how assets prices are driven ny evermore bank credit for financial transactions.

    The moment is stops, assets prices fall and bankruptcies happened, the whole thing goes bust

    Guidance of bank credit, simple rules are needed. Simply ban bank credit for financial transactions. That creates boom-bust cycles

    Let the speculators, speculate but not allow them to borrow money from banks

    We need to create small banks to support SME. No boom-bust cycles but a stable growth

    Small banks or community banks never borrow public money and no customer has ever lost money

    Prof Richard Werner

  2. Who would go to skillshare when you get free information on YouTube ? I predict that one day YouTube buys skillshare.

  3. Fed exists to pump up the stock market, rob savers and future generations, and create debt induced bubbles. Economy would TANK if rates were at 3% in America and 1% in Europe or Japan.

  4. You lost all creadability when you referred to the united states, as america.america is a continent, not a country.

  5. What's with the catgirl in the picture at 6:09? Is this a channel signature sort-of thing? An attempt to start a historical conspiracy theory? Or just a bit of fun by the editor?

  6. why the americans need to create weird things to solve a basic problem. in the eu this is the European central banks which is compose of the national banks and the nominations are made by the head of state of every eurozone country and the are confirm by the european parlement.

  7. Whenever they use the term "conspiracy theory" as a derogatory opening , you know they are playing off of a warn out CIA tactic to silence and discredit truth.

  8. Funny coincidence that income tax was created at the same time…but then what good is loaning money to the government with fake dollars if you get ripped off ? unless you have a way to guarantee the public has to pay it back.

  9. New reply on "TgdfsjdjdjRothschild Rockefeller morgan international rats bankers. Owners from federal reserve they ordered disappear Kennedy fam. Because Kennedy removed them from making the nation's money.bgshskskdhfhgs­jjsk"

  10. Why are you calling it the Fed? you're trying to associate them with the federal government when they aren't a part of our government at all; it's a Jewish source of control and power over America and the West.

  11. Cinderella…the bankers being the prince….vomit vomit vomit…U have left out so much more…Cinderella and the magic pumpkin plus mice turning into coachmen: the WHOLE FABLE, turned reality!

    What a soul sickening upload…banker's rule the world and right now so much pollution from the skies, rivers, oceans, oil fields…good humanity (GOD-BANKERS) almighty forever…this is a soul sucking sickness prevelant upon the planet!

    You aid and abett such sickness…shame on you…except..lol…you didn't do anything wrong did ya?

  12. The Board of Governors, rubber stamped by the President. Does ANYONE actually believe that the President has ANY say over WHO these governors are? This gentleman fails to mention that these Banks CANNOT be audited by ANY branch or entity of the United States government. We ALL know that Bankers are benevolent and would NEVER place their interests, greed or usury above that of the Nation (Yeah, right) That 6% dividend, calculated with compound interest, would double EVERY twelve years. These people do NOTHING for the Country except extract its wealth on a continuing basis. If I told you that you could have a bank, never be audited and have unlimited funds would that be like a fairy tale? Well, THIS is exactly what these parasites have created. These people set interest rates. THEY tell the treasury how much and when to print our currency which is against our own Constitution. The 16th Amendment was never ratified by the number of votes needed in Congress but stands as law. It is ILLEGAL. WHEN the economy crashes because of MASSVE overprinting of our currency, the Federal Reserve will blame it on government overspending. The "dividends" we pay the Federal Reserve over the years is the REAL culprit. THESE people should be held accountable for ALL of their financial misdeeds. Alan Greenspan, when he was Chairman of the Federal Reserve was asked what he thought about OUR government conducting an audit of the Federal Reserve.His answer "That would be a bad idea"

  13. The Dutch central bank worked quite differently from the Fed, and indeed the bank of England. Anyways, the Netherlands were by no means backwash, even before, so it's not true the bank made them great. But yes, it helped finance war against Spain and expand trade. The British used their Bank as primary means of exploitation, much like the Fed today.

  14. This video is damage control limited hangout propaganda. You should have know by this casual fuzzy bunny approach that you hear on so many videos.

  15. the major choke points for information on the internet are owned by Jews, including, but not limited to, Google, YouTube, Yahoo, Facebook, and Wikipedia. the Zionist influence over those companies is palpable. for ex. Google's Sergey Brin, Facebook Mark Zuckerberg, and Yahoo's president Susan Decker attended a presidential panel on technology presided over by Israel's president Shimon Peres, during Israel's 60th anniversary celebrations, May 13 – 15, 2008. Google has establish a research and development center in Israel. Google activity censors articles and whole websites that are critical of Israel or reveal the criminal machinations of the Jews. Google follows dictates from the ADL and other Zionists organizations to adjusts its search robots to censor websites that are critical to Jews or Zionism.

  16. This is a trash explanation the real money is made devaluing the dollar, fluctuating the interest rate and profiting of the control of the stock market boom bust cycle.

  17. FED created this rigged game and Bernanke is one of the biggest criminal
    FED is the biggest Ponzi scheme ever in US history

  18. No mention of Amschel. "Give me control of a nation's money supply, I care not who makes its laws" This guy went to the wrong college. Not to mention that fateful day Woodrow Wilson signed the "bill" penned by those genius thugs on Christmas Eve, when the rest of representatives were on holiday, and weren't there to vote!

  19. Fractional Reserve banking leads to panics. Panics require a Central Bank that can create national currency out of thin air. Without Fractional Reserve banking, we wouldn't need a Central Bank, or an elastic currency. We could have an inelastic currency issued by the Treasury, and zero inflation, year after year.

  20. Federal Reserve is a scam.

    They print money out of thin air, and the dollar is backed by nothing. The Rothschilds are the lizard people. They can shapeshift.

  21. Federal Reserve print money out of thin air and then charge the citizens
    of America interest on the money they created out of nothing.
    The Fed is the first Deep State, owned by foreign banks, European
    Elites and billionaire Americans. It's purpose is to not only profit them
    but also to control the people of the USA. The Fed should be nationalized
    and then eliminated. The Fed is the 'piggy bank' for the Elites paid
    for by the sweat and blood of US citizens.

  22. It's not often you get to hear the structure of a criminal cartel profiting from fraudulent activity described as "beautiful".

  23. It’s pretty painful to think that people believe in this idea that banking is a world wide conspiracy. If it weren’t for financial controllers and unified wealth systems…we would be in mud huts

  24. You're misquoting what Paul Warburg said in the 1st 2 minutes of the video.
    Who was the guy that sabotaged the copper? You went right into Jp Morgan and Rockefeller

  25. Yeah let's give private banks the sole ability to print our money lol the federal reserve has been robbing the American people since it's conception

  26. "To keep the economy stable" Yeah, right. Dow went down whole 3% today thanks to the games played by the financial world.

  27. The Federal Reserve is a CRIMINAL organization that needs to be disbanded!!
    They are siphoning the taxpayers money and getting filthy rich!!
    It's a SCAM!!
    President Kennedy was ASSASSINATED because he was going to end it's grip on the UNITED STATES!!

  28. most of this video is a huge lie. do yourself a favor ,do your own research. JP morgan is an evil scumbag. he arranged for the deaths of many millions and most people don't even know it.

  29. I like how this video makes the greedy bankers look like heroes when in reality they are thugs stealing from the working people while they don't pay their fair share of taxes. Look at the debt we're in. Who got bailed out in 2008? Definitely not the people.

  30. Fiat currencies have a 100% fail rate. What people don’t understand is that all the other currencies were tied to the dollar and the dollar was tied to gold. When the other nations realized the US didn’t have as much gold as they claimed they started cashing in, trying to get what’s rightfully theirs before it was too late. Then Nixon took the US off the gold standard so that the other countries couldn’t take their gold back. So now everyone’s anchored to the dollar and the dollar is backed by nothing but credit.

    It’s a great deal for America. They’re allowed to print trillions of dollars for free and the other countries have to accept these dollars. The problem is when the same thing that happened repeats itself ( the nations realize the dollar is worthless and start cashing in like they were doing before 1971) all those trillions of dollars are sent back to the US which causes hyperinflation. If you don’t understand what’s bad about that then research hyperinflation.

    The good thing about gold is that for 5000+ years it has been accepted as legitimate money. People say gold is just rocks and sure they’re right but as humans we’ve always valued these rocks. These rocks can’t be manipulated either because gold is created when stars explode so unless the government tries to ‘blow up the sun’ they can’t keep making more like with the dollar. If you still think this doesn’t matter just look at history. The value of gold used to be $35 an ounce until the US started to print the dollar excessively. To keep up with the dollar gold didn’t magically multiply itself, the value just increased with the quantity of the dollar which is why an ounce today is like $1350+. When the dollar inevitably crashes and the chickens come home to roost gold will still be valuable, in fact it will be even more valuable. Which is why countries like China are mining and buying up as much gold as possible.

  31. The federal reserve are an evil corporation. People say the system is broken but the system works perfectly. It was meant to financially enslave the people and make the owners of the fed richer. The government tells you taxes are for schools healthcare and roads but that’s a lie. Taxes are to pay the fed interest on the loans the government took from them. The thing is that the fed literally just create money and lend it out with interest. If normal people try to buy something with no money in their account the transaction doesn’t go through but if the fed tries to loan money with no money in their account it’s perfectly fine. So literally everything is profit.

    The fed also isn’t owned by the government because it has shareholders. No one knows who exactly owns the majority of the fed but it’s a few of the big banks. The whole system is super fucked up. Look into it

  32. The fed is based in expeculations, manipulations, convenience and lies; that only benefits a group of elite families.

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  34. You are a deep state shill lying for the evil bankers. Do you think you will ever own enough shares in chase or any bank to rob the united states likes those conspirators who killed their opponents in the titanic? Yeah look in to the truth. Your channel is disgusting.

  35. Look at all the conspiracy theorists in the comment section. Any flat earthers and sovereign citizens in this deluded mess?

  36. The Fed and everything world wide is controlled and owned by the Zionist Jews. America is no longer America. It is called Jewmerica. The Jew's own America and all countries. Trump just increased funding to Israel from 8 billion annually to 14.5 billion. Israel is Rothschild's headquarters. Oh. American taxpayer dollar pays Israel annually. So everything you all work for and have taxes taken out of your pay goes to Israel Also the IRS is owned by the Zionist Jew's. Got news for the Jew's. The world is owned by everyone Zionist Jew Rothschild's, Rockefeller's, DuPont's. etc. God created earth for everyone and you did not so go back and tell your evil Satan you all worship.

  37. How The Federal Reserve Works: Millions of people working for and believing in Worthless Paper ……….. Thee ENSLAVEMENT of a Freedom Loving Constitutional Republic to a Tyrannical Shadow Government.

  38. How The Federal Reserve Works: Millions of people working for and believing in Worthless Paper ……….. Thee ENSLAVEMENT of a Freedom Loving Constitutional Republic to a Tyrannical Shadow Government.

  39. im the one true owner of the federal reserve and everyone is trying to steal it from me and no one will help me in even a slightest of ways

  40. If a run on the bank can banckrupt "even solvent banks" then the bank wasnt actually solvent. You really spent time on a youtube video and didnt realize you were saying something so stupid?

  41. The “Federal” Reserve Bank is a private central bank. Throughout the majority of its existence, it has been headed by Zionists. This bank prints all the money. It can’t be taxed. It can’t be audited. It was created the same year the IRS was created and income tax became law. These gangsters make Al Capone look like a lemonade stand thief. Every year the dollar in your pocket is worth less and less and less. Yet they keep pulling that print lever as we binge on trash TV.

  42. fixcreditsolutions is awesome was able handle my collections removed 12 hard inquiries with very affordable price, they are excellent. Via mail fixcreditsolutions @outlookcom

  43. Banksters have controlled our country since 1913 they killed JFK for taking away their monopoly on our money he started to print United States Notes instead of Federal Reserve Notes and two days after he was killed LBJ revoked the US Notes executive order. JFK realized 50 years of bankster control was enough and no other President has dared challenge them. Any President who might want to print US Notes knows what will happen to him.

  44. Serious question. What was happening before the Fed, would the difficulties that brought the FED have corrected themselves with time?

  45. its not the question as to why central banks are there, in fact they are important like a well meaning' PEO":) to pick up tab or get things straightened out when they get way bad. But its working ought to be for everybody and putting things right for all , human beings should not suffer just because there is not sufficient work outlet for everybody to work in, in this case what are they suppose to do… Die? along with their families… as it is in most of 3rd world countries happening… NO! you need to see that human life is not to be equated with some legitimate paper money making them suffer and need to step in to see things get right , make sure population stays under control.. work training outlets are on par with working population… better economic financial systems from wages to fraudulent insurance business's, because only very small group is in money manipulation market… rest are hard working families into various working groups of world from tech engineering, medical social education all sorts of fields… retail, big business's oils what not…. but at the end it all boils down to uniformity of distribution of economics, funds to people and there every single Nation in this world has problems which doesn't seems to be getting solved. while on one side Governments are busy pumping fed monies into building huge infrastructures from going into space to what not but basics of looking after every social section is being left … from your faulty medical systems education, housing wages these are most important things to be upgraded while building your trillion dollar space programs and playing in world Arena as we are the supremos.

  46. What can be learned from the past’s mistakes and the pasts past success that can be worked into a strategy based on today are most common needs and interests?  Big think.

  47. Business Casual is obviously one of the “insiders” that doesn’t tell the whole inside story. Indeed, touting being able to purchase stock from the criminals who enable the Fed. Reserve!

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