It’s a truly sad reality that this headline sparks such a range of emotions in readers, from doubt to confusion… surprise to melancholy.
This information is no big secret. It’s not even hidden (maybe in plain sight). It’s just the typical operations of the Federal Reserve System as reported in its annual audit called the Comprehensive Annual Financial Report (CAFR).
For those actually interested in seeking the truth about this federal agency, here is the link to the Board of Governors CAFR for 2011, the latest audit of the Fed. In fact, its the 98th audit of the Fed. It explains how everything operates, its foreign investments and foreign currency swaps and schemes, its many separate limited liability corporate holdings like Maiden Lane, its dealings and bailouts with AIG, Bears Stearns, and JP Morgan, and of course its assets and liabilities balance sheet.
Within this 479 pages of dry and boring financial reporting is a full description of the Fed’s operations, including the basic financial happenings of each individual reserve bank. Yeah, I know, it doesn’t have the flair of a good “Secrets of the Temple” or “Creatures” type of novel, but its got all the actual facts and figures from TARP to SOMA. Why? Because this is what is required by federal law.
If you want to know about the Fed, read the CAFR.
If you want to know about your city, read the CAFR.
If you want to know about your county, state, district, or any other governmental agency or corporation, read the CAFR.
Here are a few highlights:
Board of Governors of the Federal Reserve System
To: The Speaker of the House of Representatives:
Pursuant to the requirements of section 10 of the Federal Reserve Act, I am pleased to submit the ninety-eighth annual report of the Board of Governors of the Federal Reserve System. This report covers operations of the Board during calendar year 2011.
On March 22, the Federal Reserve System released audited financial statements for 2010 for the combined Federal Reserve Banks, the 12 individual Reserve Banks, the limited liability companies that were created to respond to strains in financial markets, and the Board of Governors. The Reserve Banks reported comprehensive income of close to $82 billion for the year ending December 31, 2010, an increase of $28 billion from 2009.
r. Interest on Federal Reserve Notes
The Board of Governors requires the Reserve Banks to transfer excess earnings to the Treasury as interest on Federal Reserve notes after providing for the costs of operations, payment of dividends, and reservation of an amount necessary to equate surplus with capital paid-in. This amount is reported as “Payments to Treasury as interest on Federal Reserve notes” in the Combined Statements of Income and Comprehensive Income. The amount due to the Treasury is reported as “Accrued interest on Federal Reserve notes” in the Combined Statements of Condition.
If earnings during the year are not sufficient to provide for the costs of operations, payment of dividends, and equating surplus and capital paid-in, payments to the Treasury are suspended. A deferred asset is recorded that represents the amount of net earnings a Reserve Bank will need to realize before remittances to the Treasury resume. This deferred asset is periodically reviewed for impairment.
Income and Expenses
Table 4 summarizes the income, expenses, and distributions of net earnings of the Reserve Banks for 2011 and 2010. Income in 2011 was $85,241 million, compared with $79,301 million in 2010.
(Note: $85,241 million is $85.241 billion, and is written as $85,241,000,000 – the word million means to add six 0’s)
Distributions to the U.S. Treasury in the form of interest on Federal Reserve notes totaled $75,424 million (75.4 billion) in 2011. The distributions equal comprehensive income after the deduction of dividends paid and the amount necessary to equate the Reserve Banks’ surplus to paid-in capital.
Table 4. Income, Expenses, and Distribution of Net Earnings of the Federal Reserve Banks, 2011 and 2010
Distributions to U.S. Treasury (interest on Federal Reserve Notes):
$75,424,000,000 in 2011
$79,268,000,000 in 2010
Table 9A. Statement of Condition of the Federal Reserve Banks, by Bank, December 31, 2011 and 2010
Interest on Federal Reserve notes due to U.S. Treasury (note 13): listed as total and by individual bank
Note 13 – Represents the estimated weekly remittances to U.S. Treasury as interest on Federal Reserve notes or, in those cases where the Reserve Bank’s net earnings are not sufficient to equate surplus to capital paid-in, the deferred asset for interest on Federal Reserve notes. The amounts on this line are calculated in accordance with Board of Governors policy, which requires the Federal Reserve Banks to remit residual earnings to the U.S. Treasury as interest on Federal Reserve notes after providing for the costs of operations, payment of dividends, and the amount necessary to equate surplus with capital paid-in.
Payments to U.S. Treasury (interest on Federal Reserve notes) $75,423,597,000
Table 11. Income and expenses of the Federal Reserve Banks, 1914–2011
Distributions to the U.S. Treasury – Interest on Federal Reserve notes:
Total for all years (1914-2011): $842,337,007,000
Total income all years (1914-2011): $1,013,516,673,000
(Translation: over 80% of the Fed’s income is transferred right back to the U.S. Treasury.)
$44,113,958,000 – Represents transfers made as a franchise tax from 1917 through 1932; transfers made under section 13b of the Federal Reserve Act from 1935 through 1947; and transfers made under section 7 of the Federal Reserve Act for 1996 and 1997.
Federal Reserve Banks Combined Statements of Income and Comprehensive Income for the years ended December 31, 2011 and December 31, 2010
Distribution of comprehensive income:
Dividends paid to member banks: $1,577,000,000
Payments to Treasury as interest on Federal Reserve notes $75,424,000,000
Total distribution 2011 = $77,376,000,000
While it is true that national and state banks certainly get some great benefits by forcibly being members of the central government’s Federal Reserve, those benefits are nothing but the statutory ones granted to them as members. Obviously, the real profiteer here is the Treasury of the United States Federal Government, as these figures have shown us. The dividends paid to member banks are peanuts compared to the “interest” paid to the Treasury.
But still the fallacy persists that the Fed is not beholden to the U.S. government.
For those who still insist that the “bankers” somehow own the Federal Reserve, again, for God’s sake, please just read the Federal reserve Act and especially the CAFR:
p. Capital Paid-in
The Federal Reserve Act requires that each member bank subscribe to the capital stock of the Reserve Bank in an amount equal to 6 percent of the capital and surplus of the member bank. These shares are nonvoting, with a par value of $100, and may not be transferred or hypothecated. As a member bank’s capital and surplus changes, its holdings of Reserve Bank stock must be adjusted. Currently, only one-half of the subscription is paid in and the remainder is subject to call. A member bank is liable for Reserve Bank liabilities up to twice the par value of stock subscribed by it.
By law, each Reserve Bank is required to pay each member bank an annual dividend of 6 percent on the paid-in capital stock. This cumulative dividend is paid semiannually. To meet the Federal Reserve Act requirement that annual dividends be deducted from net earnings, dividends are presented as a distribution of comprehensive income in the Combined Statements of Income and Comprehensive Income.
This “non-voting” stock is not a choice, but a requirement to be a member and have the privilege of being in this organized crime syndicate of banks called the Federal Reserve System. It simply allows member banks to “print” money where none existed before.
The so-called “bail-outs”, for instance, weren’t in the form of a taxpayer loan or bond to these member banks, it was simply the act of the Federal Reserve allowing certain favored member banks the one-time privilege to actually print money without loaning it out. You don’t join the Federal Reserve system because you want to be a member, you join because you have no choice.
There are so many more questions that can be answered in this CAFR, but only if you really want to know the answers.
To most, the promoted fictions, fallacies, and fairy tails about the Fed are much easier to entertain than the 479 pages of shear agonizing and sleep-inducing truth that lay within these audited financial statements of the Federal Reserve. And for a lone researcher like myself, it pains me to watch the daily feeding frenzy of misinformation surrounding this investment and currency scam, where inaccuracy and downright fiction rule over any comprehension of what the Fed really is, what it does, and who its master is.
–Clint Richardson (realitybloger.wordpress.com)
–Tuesday, October 15th, 2013