In form as well as in content, the Federal Reserve System is precisely the cozy government-big bank partnership, the government-enforced banking cartel, that big bankers had long envisioned.

Many critics of the Fed like to harp on the fact that the private bankers legally own theĀ Federal Reserve System, but this is an unimportant legalistic fact; Fed profits from its operations are taxed away by the Treasury.

The benefits to the bankers from the Fed come not from its legal profits but from the very essence of its operations: its task of coordination and backing for bank credit inflation. These benefits dwarf any possible direct profits from the Fed’s banking operations into insignificance.


The major instrument of Fed control of the money and banking system is its “open market operations”: its buying and selling of U.S. government securities (or, indeed, any other asset it wished) on the open market.


Over the years, all early restraints on the Fed activities or its issuing of credit have been lifted; indeed, since 1980, theĀ Federal Reserve has enjoyed the absolute power to do literally anything it wants: to buy not only the U.S. government securities but any asset whatever, and to buy as many assets and to inflate credit as much as it pleases. There are no restraints left on the Federal Reserve.

Murray N. Rothbard, The Case Against the Fed