Truthful News

Hidden History: Federal Reserve

By Arleen Richards

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To understand why the president can’t influence the Federal Reserve’s decisions, one has to know the history of how and why the Fed was born.

According to a working paper prepared by the Hutchins Center, a think tank on monetary policy, a 1907 earthquake in California drew gold out of major money centers, resulting in a recession. A panicked Congress sought to overhaul the nation’s monetary system but couldn’t agree on the terms.

President Woodrow Wilson proposed the creation of 8 to 12 reserve banks run by appointees of private bankers but supervised by a single central board of Presidential appointees. Wilson’s vision formed the basis of the Federal Reserve Act of 1913.

However, Wilson’s proposal caused a turf war, which led to Congress revoking Wilson’s vision and placing centralized authority in the Board of Governors, which is the Federal Reserve we know today.

The 12 quasi-private Reserve banks lost their autonomy but sustained their ability to operate independently as corporations. By placing central authority in the Board of Governors, an independent agency of the federal government, Congress essentially gave up their constitutional authority to tax and spend public money…an authority that was intended to serve the people.

As an independent agent, the Fed exists outside of the federal executive departments and therefore is not subject to the president’s control. Its decisions are not affected by politics.


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