by Pam Martens and Russ Martens, Wall St On Parade:
A fascinating new academic paper has been released. Its title is “The Myth of Fed Political Independence.” Its premise is this: “The much-vaunted independence of the Federal Reserve is a myth. The Fed is not the bastion of sound monetary policy. Rather, it is just another politically coopted agency of the federal government.”
The study asserts further that “Something like the Stockholm syndrome seems to describe the institutional relationship that exists between the U.S. Congress and the White House (the captors), and the Federal Reserve (the captives).
The paper is written by Thomas Joseph Webster, Professor Emeritus of Economics at Pace University’s Lubin School of Business, who has written extensively on the Fed and the role that its quantitative easing has played in ballooning budget deficits, the national debt and inflation.
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Dr. Webster previously worked as an international economist with the Central Intelligence Agency and the U.S. Department of Defense – which suggested to us that he might have insights into the workings of the U.S. government that we were missing in our analysis of the Fed.
Based on our analysis over three decades of research, the Fed has been captured by the Wall Street megabanks. But is it possible that both our premise and that of Dr. Webster could be simultaneously correct? If Wall Street has also captured key components of the Executive Branch and the U.S. Congress, then there is actually no conflict between these premises.
Let’s start off with some basic facts that are not in dispute.
The Federal Reserve Board of Governors is defined as “an independent agency” of the federal government. However, what makes up the Federal Reserve System is both the Board of Governors and 12 regional Fed banks that are private corporations. These 12 regional Fed banks are, literally, owned by shareholders which are the member banks in the respective 12 Fed districts.
These members banks in each respective Fed district elect six of the nine members of each regional Fed bank’s Board of Directors. (While Jamie Dimon was serving as Chairman and CEO of JPMorgan Chase, and his bank was under investigation by the New York Fed for losing $6.2 billion of depositors’ money by gambling in derivatives in London, Dimon was sitting on the New York Fed’s Board of Directors.)
The five largest shareholders of the New York Fed are Wall Street megabanks: JPMorgan Chase, Citigroup, Goldman Sachs, Morgan Stanley, and Bank of New York Mellon. As this might suggest, the balance of power at these 12 regional Fed banks is far from level.
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