In November 1910, a group of men boarded a private train in New Jersey, using first names only, and traveled to Jekyll Island off the coast of Georgia. They represented the Morgan, Rockefeller, and Kuhn, Loeb banking interests. Their mission: draft a plan for a central bank that would serve their interests while appearing to serve the public. Senator Nelson Aldrich led the group. Also present: Paul Warburg, a German-born banker whose ideas shaped much of the framework. Three years later, on December 23, 1913 -- while most of Congress was away for Christmas -- the Federal Reserve Act was signed into law by President Woodrow Wilson. The institution that controls the value of every dollar in your pocket was born from a secret meeting of bankers, passed during a holiday recess, and sold to the public as a safeguard against financial panics. What the Fed Actually Does The Federal Reserve has three official mandates from Congress: maximum employment, stable prices, and moderate long-term interest rates. Its tools include: Setting the federal funds rate -- the interest rate at which banks lend to each other overnight. This rate ripples through the entire economy, affecting mortgage rates, credit card APRs, auto loans, and savings yields. Open market operations -- buying and selling Treasury securities to increase or decrease the money supply. Reserve requirements -- dictating how much cash banks must hold against deposits (set to zero in March 2020). Quantitative easing (QE) -- creating money electronically to purchase massive quantities of Treasury bonds and mortgage-backed securities. That last one is the important one. Because QE is how the Fed creates trillions of dollars out of thin air. Quantitative Easing: Money From Nothing After the 2008 crisis, the Fed launched QE on an unprecedented scale. It purchased trillions in Treasury securities and mortgage-backed securities, expanding its balance sheet from roughly $900 billion in 2007 to over $8.5 trillion at its peak. The Congressional Budget Office explains that QE involves the Fed "purchasing predetermined amounts of government bonds" to inject liquidity into the financial system. In plain English: the Fed created money electronically and used it to buy assets from banks, pumping cash into the financial system. Who benefited? The banks that sold their assets at full value. The investors who saw stock markets inflate. The corporations that borrowed at historically low rates. Who paid? Anyone who holds dollars. QE expands the money supply. More dollars chasing the same goods means each dollar buys less. That's inflation -- and it functions as a hidden tax on everyone who saves in cash, which disproportionately affects lower-income households. Who Owns the Federal Reserve The St. Louis Fed's own explanation states: "The Federal Reserve Banks are not a part of the federal government, but they exist because of an act of Congress." The system consists of 12 regional Federal Reserve Banks, each with its own board of directors that includes commercial bankers. Member banks are required to hold stock in their regional Fed bank and receive a guaranteed 6% dividend on that stock. The Board of Governors in Washington is a government agency. But the 12 regional banks operate with significant independence. The structure was designed to look public while preserving private banking influence. As the Richmond Fed itself acknowledged, the plan developed at Jekyll Island "laid the foundation for what would eventually be the Federal Reserve System." 2008: The Bailout That Broke the Social Contract When the financial system collapsed in 2008, the Fed responded with the largest transfer of wealth from taxpayers to private institutions in American history. The Levy Economics Institute estimated the total bailout at $29 trillion in combined Fed emergency lending, guarantees, and other commitments. MIT Sloan calculated the direct cost at approximately $498 billion on a fair value basis -- 3.5% of GDP. Meanwhile, over 6 million families lost their homes to foreclosure. The Treasury committed $50 billion in TARP funds for homeowner assistance programs. The banks received hundreds of billions in direct capital injections. The homeowners got a fraction of what was promised, and much of that was never actually distributed. The message was clear: the Fed exists to protect the financial system. The financial system is not you. The Audit the Fed Movement Representative Ron Paul introduced the Federal Reserve Transparency Act repeatedly starting in 2009. The bill called for a full audit of the Fed's activities, including its lending programs and agreements with foreign central banks. It gained over 300 co-sponsors in the House -- a majority -- yet never became law. The Fed has fought transparency at every turn. It took a Bloomberg FOIA lawsuit lasting over two years to force the disclosure of which banks received emergency lending during the crisis and how much. When the Government Accountability Office finally conducted a limited audit in 2011 as required by the Dodd-Frank Act, it found conflicts of interest at the Fed, including instances where Fed officials had financial ties to institutions receiving emergency assistance. How Fed Policy Hits Your Wallet Inflation. The dollar has lost over 97% of its purchasing power since the Fed was created in 1913. What cost $1 in 1913 costs over $30 today. Savings punishment. When the Fed sets interest rates near zero, savers earn nothing while asset holders see their portfolios inflate. This transfers wealth from people who save to people who own assets. Housing unaffordability. QE and low rates inflated housing prices far beyond wage growth. Homeownership became harder, not easier, in the era of "easy money." Stock market dependency. When monetary policy drives asset prices rather than economic fundamentals, retirement accounts become hostages to Fed decisions. The Uncomfortable Question The Federal Reserve was created by bankers, for bankers, in a process that was deliberately concealed from the public. It operates with more independence than virtually any other government institution. Its policies consistently benefit those closest to the creation of money -- banks and large financial institutions -- at the expense of those furthest from it: wage earners, savers, and anyone on a fixed income. You live inside a monetary system you were never asked to consent to, controlled by an institution you can't vote out of office, making decisions that determine whether your savings hold their value or evaporate. They didn't ask if we wanted a central bank that works for Wall Street first. They built one while we weren't looking. _- The Department_