General Question

King_Pariah's avatar

The biggest holder of US Government debt is... the Federal Reserve and Intragovernmental Holdings, this come to a surprise to anyone and how does the Government exactly owe the Federal Reserve money? Isn't the Federal Reserve part of the Government?

Asked by King_Pariah (11393 points ) February 2nd, 2012

The US Gov’t. is in debt to the Federal Reserve $6.328 trillion dollars as opposed to China in which the US Gov’t. is in debt $1.132 trillion. My biggest question is… how does the Gov’t end up being in debt to the Federal Reserve at all? Maybe I shouldn’t have slept through AP Government, but isn’t the Federal Reserve part of the Government?

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18 Answers

wundayatta's avatar

This is how money is “printed.”

It is how we, in a concrete way, achieve the goal of improving people’s feeling of wealth. It is that feeling that lets people spend, and the resulting spending that will concretely jump start the economy. Or start it. Not a lot of jumping going on. Or maybe, at these low levels of stimulus, merely keep it from slowing so quickly.

That you slept through government (AP or not) kind of helps me understand how much you need to learn if you are to get a grasp on this, and I can tell you you are not going to learn it on fluther. You really need to take an economics class—preferably one that deals with things like the Federal Reserve.

tedd's avatar

I’ve been commenting on this fact for months, and have done so at least twice on Fluther in the past week.

People are simply stupid and buy into all the hype that the “news” is telling them, before looking at facts like this.

King_Pariah's avatar

little note: I didn’t sleep through AP Econ, we never touched base on how the hell the US could owe the federal reserve money so I assumed it must have been in Gov when I was sleeping

@tedd huh, must have missed your posts, my bad.

Anyway, thanks for the responses. :)

majorrich's avatar

The Federal Reserve system is private, while the Department of the Treasury is part of the government. I have some notes on it, but can’t post the secure link. I found a pretty good article and discussion here . It isn’t as full an explanation as I have space for, but should give you a good place to start.

King_Pariah's avatar

The Federal Reserve is private? Huh, that then actually makes a lot of sense. Thanks!

Rock2's avatar

The Federal Reserve is not our friend. The only control we have over it is that the President can appoint the Chairman to the Board. Not much control if you ask me.

The Federal Reserve has never been audited. We don’t know where our money goes except that we know that a lot of it has gone to foreign owned banks.

The first step is to audit the federal reserve. Then go from there.

laureth's avatar

The Treasury prints money. The Federal Reserve is the way money is distributed.

The Federal Reserve is a weird public/private hybrid.

The Federal Reserve has been, and is regularly audited by private and governmental auditors.

And finally, when the Social Security Trust Fund must, by law, be invested in Treasury bills (rather than just sitting there doing nothing), it explains the OP.

laureth's avatar

For further Fed information, I recommend my answers here, here, and all along this question.

Russell_D_SpacePoet's avatar

No surprise here. the Fed. is a central bank. Privately owned. Every time we need more money printed, the Fed. charges us interest. Total bs in my opinion.

Rock2's avatar

I have never seen or heard of the results of an audit of the fed. Where is it? Why are they calling for audits from Ron Paul et al?

laureth's avatar

@Rock2 – Here’s the latest results. Why are Ron Paul, et al, calling for audits? I don’t know. Perhaps they don’t understand that the Fed is audited, or they don’t understand how the Fed works, or they do understand these things but have an agenda that would be advanced by pretending that they don’t. (So either he’s lying, or he’s incompetent, or he’s both. None of these options make me feel good about having him as a President.)

I expect that they will be audited again this month.

The GAO also audits the Fed.

@Russell_D_SpacePoet – re the Fed being private: Half right. It’s a weird public-private hybrid. Its Board of Directors (Federal Reserve Board of Governors) is appointed by the President, subject to the advise and consent of the Senate. (This is why it was a big deal when the Senate Republicans filibustered a Nobel Laureate in Economics into withdrawing his appointment a while back.) The managers of regional offices (President of the Federal Reserve Bank of _____) are appointed by the banks in that region. Every year, the annual profit of the Federal Reserve is sent over to the Treasury, and applied to the national debt; this is why worries that the Fed would lose money over TARP were a big deal: No profit, no annual tax-free reduction in the debt.

Russell_D_SpacePoet's avatar

@laureth And secret bailouts, etc. etc. Those came to light at the tail end of last year. The Fed. is not a good thing.

Rock2's avatar

@laureth
I’ll have to digest those numbers. I expected the numbers to be in the billions rather than the millions.

laureth's avatar

@Russell_D_SpacePoet – [Citation needed], basically. I’m not sure what “secret” bailouts you’re talking about, nor do I know what you mean by “etc. etc.” Please explain?

laureth's avatar

I notice those sites both say this is the “first ever audit,” though, which makes them smell a little unreliable to me. It has been audited many, many times before. It makes me wonder what else they’ve misunderstood. I don’t know the reliability of your “Silver Bear Café” link, but Bernie Sanders is about as reliable as Ron Paul when it comes to some things.

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