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
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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 it 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
backgrounds 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 2000 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 the 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 were through all
of their money pretty soon even bags as
it had nothing to do with the guy were
going under and so the fearful bankers
of America turned to the only man with
the power to save them JP 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 belongs 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
it's 23 Wall Street with the collective
capital of America's big banks Morgan
arranged for the rescue of the healthy
bags 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 sales for example was
afraid that a powerful central bank
would give Washington and Wall Street's
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 five 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
back unlike any other in the world to
begin with it wasn't a single bank
instead it was a network of 12 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 the key votes needed to pass
legislation which is why today Missouri
is the only state to have two Federal
Reserve Bank's 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 feds
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 six
percent 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 a hundred
dollars per share and they can't 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 six percent dividend
per year now it's worth noting that this
dividend doesn't entitle the banks to
any of the feds profits instead
everything the Fed earns above that six
percent payout goes directly into the
Treasury and keep in mind the Fed is
very profitable in 2017 it sent eighty
billion dollars to the Treasury
while only paying out fourteen 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 a hundred and fifty
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 and American banks
since ownership and the feds depends on
capital the bigger the bank is the
bigger its ownership stake therefore it
would be wisest to start from the top of
the list and speaking of the stock
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