BY: Edward Flaherty, Ph.D. Department of Economics College of Charleston, S.C.

Facts: Yes, the Federal Reserve banks are privately owned, but they are controlled by the publically-appointed Board of Governors. The Federal Reserve banks merely execute the monetary policy choices made by the Board. In addition, nearly all the interest the Federal Reserve collects on government bonds is rebated to the Treasury each year, so the government does not pay any net interest to the Fed.

Facts: No foreigners own any part of the Fed. Each Federal Reserve bank is owned exclusively by the participating commercial banks and S&Ls operating within the Federal Reserve bank’s district. Individuals and non-bank firms, be they foreign or domestic, are not permitted by law to own any shares of a Federal Reserve bank. Moreover, monetary policy is controlled by the publically-appointed Board of Governors, not by the Federal Reserve banks.

Fact: Independent accounting firms conduct full financial audits of the Federal Reserve banks and the Board of Governors every year. The Fed is also subject to certain types of audits from the Government Accounting Office.

Facts: The Federal Reserve rebates its net earnings to the Treasury every year. Consequently, the interest the Treasury pays to the Fed is returned, so the money borrowed from the Fed has no net interest obligation for the Treasury. The government could print its own currency independent of the Fed, but there would be no effective safeguards against abuse of this power for political gain.

Facts: The Federal Reserve banks have only a small share of the total national debt (about 7%). Therefore, only a small share of the interest on the debt goes to the Fed. Regardless, the Fed rebates that interest to the Treasury every year, so the debt held by the Fed carries no net interest obligation for the government. In addition, it is Congress, not the Federal Reserve, who is responsible for the federal budget and the national debt.

Facts: Kennedy wrote E.O. 11,110 to phase out silver certificate currency, not to issue more of it. Records show Kennedy and the Federal Reserve were almost always in agreement on policy matters. He even signed legislation to give the Fed more authority to issue currency.

Facts: McFadden was incorrect regarding the Fed costing the government money. However, later economic analysis agrees with him that Federal Reserve policy blunders had a substantial role in causing the Depression. However, his implication that this was done deliberately has no basis in fact. Moreover, for a dozen years prior to his rant, McFadden had been the chairman of the House subcommittee that oversaw the Federal Reserve. Why didn’t he do anything to reform or abolish the Fed while he had the chance?

Facts: The banking system is indeed able to create money with a mere computer keystroke. However, a bank’s ability to create money is tied directly to the amount of reserves customers have deposited there. A bank must pay a competitive interest rate on those deposits to keep them from leaving to other banks. This interest expense alone is a substantial portion of a bank’s operating costs and is de facto proof a bank cannot costlessly create money.

Fact: The term ‘lawful money’ does not refer to gold or silver coin, but to types of money which the government would permit banks to use when tabulating their reserves. These types of money included, but were not limited to, gold and silver coin.

BY: Edward Flaherty, Ph.D. Department of Economics College of Charleston, S.C.

Myth #1: The Federal Reserve Act of 1913 was crafted by Wall Street bankers and a few senators in a secret meeting.
Myth #2: The Federal Reserve Act never actually passed Congress. The Senate voted on the bill without a quorum, so the Act is null and void.
Myth# 3: The Federal Reserve Act and paper money are unconstitutional
Myth# 4: The Federal Reserve is a privately owned bank
Myth #5: The Federal Reserve is owned and controlled by foreigners.
Myth #6: The Federal Reserve has never been audited.
Myth #7: The Federal Reserve charges interest on the currency we use.
Myth #8: If it were not for the Federal Reserve charging the government interest, the budget would be balanced and we would have no national debt.
Myth #9: President Kennedy was assassinated because he tried to usurp the Federal Reserve’s power. Executive Order 11,110 proves it
The Legendary Tirade of Louis T. McFadden



A Brief History of Central Banking in the United States




United States Monetary Policy


What is monetary policy?
Monetary policy is a central bank’s actions to influence the availability and cost of money and credit, as a means of helping to promote national economic goals.














26 Responses to “Debunking the Federal Reserve Conspiracy Theories (and other financial myths)”

  1. 1 duggy October 17, 2009 at 8:31 pm

    dr flaherty asserts that the “fed” rebates the interest it recieves to the treasury ; he supports this claim how ?

  2. 3 Dr. Bob (ret.) March 4, 2010 at 5:03 pm

    These “facts” demonstrate how academia is always ready to defend the far leftist point of view.

    The corporate government world is in control of America, there is no doubt. Everything is Incorporated, including the Beast.

    With FDR (in my opinion) taking us off gold, taking us into bankruptcy, and incorporating the US, we’ve been obligated to pay off the indebtedness to the world central Banksters, centered in London and the Vatican, since that time.

    The world financial meltdown has been the goal of these Banksters since they began operation around the world (and in Amerika from its beginning). All toward their agenda of world control.

  3. 5 Martin Carbone March 7, 2010 at 4:09 pm

    Talk about confusing the issues … Here are, in our opinion, a bunch of lies and misdirection piled on top of fake, strawmen myths. (mrc)

    Mr. Flaherty is basically an ardent supporter of the Federal Reserve. My guess is that he is looking for a job.

    For the other side of the argument see See Wright Patman’s scathing denouncement of the Fed when he was Chairman of the House Banking Committee in 1964. “A Primer on Money” — published by the Government Printing Office in 1964. You can hardly call Patman’s attack a “Myth”. There is a link to Patman’s book on the first page of our website.
    <> Patman’s book, a formal report to Congress) inspired this website.

    Please note that Professor Flaherty, debunks his “myths” primarily by asserting they are myths and making statements that have little in the way of references to back up his assertions. Perhaps he is 100% correct — but you can’t tell until you do a lot more investigating. My guess is that he is fighting myths with his own myths — or, at least, writing to confuse the issues. He certainly does not get a high mark for presenting a well-reasoned argument. (mrc) 7/20/2009.

    Also note that there is no attribution to the Myths — I think they are essentially Strawmen that Mr. Flaherty is presenting out-of-context — because they are easy to “debunk” and thereby show, by implication, (the weakest form of argument?) what Mr. Flaherty thinks are the strong points of the Federal Reserve.

  4. 6 Dr. Bob (ret.) March 12, 2010 at 6:58 pm

    Many thanks for a fine reply to PhD Flaherty’s false economics, Mr. Carbone.

    Americans don’t realize how the field of economics, as about every other field in academia, has been hijacked by paid writers to back the Red Keynesian concepts. Then by removing sound economic theory from schools and libraries, the people remain in ignorance.

    My hope is that very soon there will be an awakening so that all the false teachers, politicians, and titled “Esquires” will be removed from their areas of influence.

    I hope we don’t have to wait til shrimp learn to whistle, either.

    • 7 Martin Carbone May 18, 2010 at 2:11 pm

      Thanks for the supporting words.

      Please send me your email address so we can communicate directly.

      Please check the first link on my website where you can download a free copy of my new book “The Little Book of Money and Banking … Movers and Shakers / Losers and Fakers”

      Marty Carbone

  5. 9 Andrew May 27, 2010 at 2:41 am

    It’s sad to see the world’s sole super power so full of citizens who are nothing but ignorant conspiracy theorists with a poor grasp of economics. Excellent rebuttal from Professor Flaherty in response to the more common claims floating around the internet.

    It’s a shame that so many “independent thinkers” swallow the garbage made popular by historically inaccurate books like the creature from jekyll island.

  6. 11 Truth June 16, 2010 at 11:08 pm

    Executive Order 11110 would have been in effect today if not for JFK’s untimely death. He was a great president; he would’ve done the world a lot of good had he not been assassinated. He was the only president that was really intent on changing things no matter what stood in his way, such as dividing the CIA into different sectors, pulling out from Vietnam, shedding light on Israel’s nuclear weapons, attempting to reveal classified information on UFOs, not providing cover for Cuban exiles, and bringing the nation out of debt by issuing the printing of silver certificates which would eliminate the Federal Reserve’s power. If I were President of the United States, then I would do what is right for the people.

  7. 12 ******** April 23, 2011 at 1:01 pm

    edward flaherty, can you please explain how a debt based economy can work. the way i see it it cant.people take out loans and then theirs not enough money in the overall money supply to pay off that debt plus the interest, so more loans have to be made so their is enough money in the money supply to pay off the existing debt. but then that means that more loans are needed again and again to keep paying off the previous debt. so basically their is always going to be debt. how is this a sustainable economy, it cant work no matter what in the end. i must be missing something, can somebody please show me how this is a good thing

  8. 13 Cheryl Garrett May 17, 2011 at 3:45 pm

    Hello all:

    I am attempting to complete my doctoral thesis in History over here in Scotland. I hope to be finished with it relatively soon, so that I have the academic qualifications to make assertions which are well-researched and move my voice and talent for teaching to a wider audience maybe through radio or youtube. People need to hear my voice and/or see me to realize that I am extremely aware of the problems this system has caused in the USA and abroad.

    I let my doctoral thesis supervisor know last night in an a-mail that I am trying to track down the gentleman who narrates (and I assume researched the information) ‘The Money Masters’. My thesis deals primarily with a powerful Scottish noble family and their movements from 1660-1724. This gent said that William III (of Orange) allowed the de Rothschilds families to formate in 1694 the private Bank of England and in 1695 the private bank of Scotland in return for their financial support for William’s wars. I’m a bit unsure if actually states that these bankers funded William’s move into England to depose James II/VII as his wife had just had a Catholic boy heir (the warming pan baby) or if the funding given to William to fight his wars against Louis XIV on the continent.

    If anyone knows how I can get in touch with the researcher for ‘The Money Masters’, I would appreciate it if I were contacted so I can discover what sources he used. This is of extreme importance as I agree with the idea that Universities are just businesses themselves now and are not places where any Historical Truth is told. I would like to challenge that directly.

    I can be reached at (University of Aberdeen)

    Thank you.

  9. 15 Victor Ingram December 13, 2011 at 8:13 am

    Hey Hidhist,
    Very interesting, …is just a conspiracy theory? That’s right, the Constitution is a myth, and that myth has been debunked. There’s no such thing. It’s just a fantasy cooked up by tinfoil-hat-wearing conspiracy theorists.

    So there’s nothing to worry about.

    Also, Bush is a conservative, the Patriot act is intended to protect us from terror, there’s no such thing as the Council on Foreign Relations, fluoride and mercury are good for your brain, and the Presidential elections are 100% legitimate. Corporations are trustworthy, the Federal Reserve is part of the government, and globalists just want to help us.

    America is still a free republic whose government is answerable to the people. The economy is fine, and the US will never be part of a supranational union. Everything is going to be OK.

    Doesn’t that make you feel so warm and fuzzy? Reality is just so nice and fun and fluffy and pleasant. I love my government, don’t you?

  10. 16 Therese Mcfadden December 14, 2011 at 11:47 pm

    The Libertarian Party, to which I must confess that I am a member, has never really taken on the constitution/composition of either the Republican or Democrat parties. In reality, the Libertarian Party is more an amalgam or synthesis of the two. It’s in that sense that many disaffected Republicans and Democrats seem to be filing into the Libertarian ranks over these past few years. Whereas the other parties force more conformity and singleness of message, Libertarians, in our laissez-faire stance to most things, allow broad opinions and vast beliefs even to the detriment of message.

  11. 17 Wade Park January 18, 2012 at 7:26 am

    I have recently read on a debunking conspiracies site that the Federal Reserve needs 6 out of 9 members who are not bankers and elected by a government body. Thus, bankers do not have majority power right? Can anyone attempt to counter this? I just want to know more. Thanks.

    It is surprising to me that these bankers are holders of the Federal Reserve’s stock: Rothschild Bank of London Warburg Bank of Hamburg Rothschild Bank of Berlin Lehman Brothers of New York Lazard Brothers of Paris Kuhn Loeb Bank of New York Israel Moses Seif Banks of Italy Goldman, Sachs of New York Warburg Bank of Amsterdam Chase Manhattan Bank of New York (Reference 14, P. 13, Reference 12, P. 152) – btw, what reference source is this from?

    • 18 anthony January 18, 2012 at 9:11 am

      I think the alleged foreign ownership of the Federal Reserve is a very common urban myth repeated time and again on the internet. We all know what happened to Lehman Brothers of New York and I can find no eveidence that the israel Moses Seif Bank of Italy even exists. The Fed is directly owned by banks domiciled in the US, but in turn some of the shares in some of those US banks are held by non-US citizens and corporations.

  12. 19 Anti-Conspiracy February 9, 2014 at 6:57 pm Have you watched this? Your response would interest me.

  13. 23 gbear February 11, 2014 at 4:28 am

    Is it just me, or does fact 1 and myth 4 contradict each other?

  1. 1 Recessionomics: The end of the Federal Reserve Bank, Part I | The Political Whore Trackback on August 19, 2009 at 11:14 am
  2. 2 Ewtman's Elliott Wave Theory Weblog » Recessionomics: The end of the Federal Reserve Bank, Part I Trackback on August 30, 2009 at 3:52 pm
  3. 3 the federal reserve killed jfk - Page 4 - Political Forum Trackback on May 6, 2011 at 9:38 pm

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