Very few people know that the Federal Reserve Bank does not belong to the Federal Government. Although the "Board of Governors of the Federal Reserve System" exists as a Federal Government agency, the "Federal Reserve Bank" itself operates as a privately-owned bank. The "Federal Open Market Committee" (which sets interest rates) operates as a part of the privately-owned Federal Reserve Bank and not a part of the Federal Government. The Federal Reserve Bank--not the Federal Government--pays the salaries of the members of the Board of Governors. There are some subtle ways to verify these claims. For example, in cities where one finds the regional Federal Reserve Banks, one will not find their phone listings under the heading Federal Government, but rather under the heading commercial banks. The Federal Reserve Bank does not use U. S. Government franked mail, but rather commercial postage meters. Also note that the Federal Government's annual budget never allocates any money to run the Federal Reserve Bank. Federal Government World Wide Web sites and email addresses end in the ".gov" domain (military addresses end in ".mil"), but the New York Federal Reserve Bank's Web home page address ends in the ".org" domain:
If we could get the Congress to pass legislation that would effectively bring the Federal Reserve Bank into the Federal Government, our federal debt problems would end! Why? Because when the Federal Government borrows money from the Federal Reserve Bank, the Federal Reserve Bank creates that money right out of thin air on the spot. But, and what a big but, the Federal Government must pay back the money borrowed plus interest! You see, the Federal Reserve Bank created the money, but it did not create the interest--and therein lies a fundamental and crucial defect in our monetary system. From where will that interest come? Obviously, from other loans. One can easily see that the federal debt will never get paid this way. Attempts to continue the status quo will cause the Federal Government ultimately to bankrupt. But, bringing the Federal Reserve Bank into the Federal Government would reverse this disastrous course almost immediately. Instead of paying interest, the Federal Government (through its own central bank) would charge interest. That interest would constitute the Federal Government's income. They could never just print money and spend it. The Federal Government could spend only the interest that came in as a result of the new central bank's lending money to banks and other institutions. The enabling legislation should also require banks to lend only money that they have in hand--in other words, banks would operate under a 100% reserve requirement. With this system, no bank would ever fail and the Federal Government would never have to bail out a bank or savings and loan. In addition, a side effect people would really like: after paying the present federal debt, the IRS would no longer have a mission because the Federal Government would self-support!
For more information and a complete explanation of the Federal Reserve System in layman's terms that anyone can understand, obtain a copy of Dr. Jacque Jaikaran's book Debt Virus. Then, look in your public library and read more technical books on the subject. You will thus verify Dr. Jaikaran's analysis. Click on the New York Fed's icon below and you will find there many publications that verify the claims made above. The Fed will send these publications to you at no charge (unless you order in quantity). Hint: when the Fed has these pubs printed, they spend debt-free money into the economy.