Question: Is the Federal Reserve “federal” as the name implies, or is it as “federal as Federal Express,” meaning a private, for-profit corporation? I’ve heard it both ways and would like the answer clarified by a hard-hitting reporter whose willing to dig a little and not spin the answer.
Paul Solman: It’s “federal” as in the Federal Government. But it was set up from the get-go as a compromise between public and private interests. So, the folks who run it are appointed, not elected, and the banking industry, which the Fed regulates, has a hand in picking the members of the regional Fed banks (there are 12 of them).
Wikipedia isn’t a bad place to read up on this if you want understand this more. But elsewhere on the Web (and in print), you’ll find a lot of malarkey about the Fed from conspiracy theorists. Not to say the Fed has been doing that great a job, mind you. The deregulatory mindset and regulatory inaction of Chairman Alan Greenspan surely helped pave the road to the current crisis, whatever the intentions. But though he was appointed by a Republican (Reagan), Greenspan was reappointed by a Democrat (Clinton). And had he been up for a popular vote, one suspects he would have prevailed in landslides.