The Federal Reserve System – A Hybrid Form of Remote Control?
October 29, 2024 | Exclusively at South Front
An analysis of the largest institutional shareholders of the most influential member banks of the Federal Reserve System provides another very distinctive insight into financial power relations at the core of the system given the primordial role of 'the Fed' in the determination of economic policy and the regulation of the financial sector in the United States. According to a series of descriptive bulletins posted on its website: "The Federal Reserve System fulfils its public mission as an independent entity within government." The bulletin describing the ownership structure of the Federal Reserve System goes on to assert, “It is not ‘owned’ by anyone and is not a private, profit making institution." (FRS, 2013a) Elaborating on these enigmatic statements it states:
"The 12 regional Federal Reserve Banks, which were established by the Congress as the operating arms of the nation's central banking system, are organized similarly to private corporations – possibly leading to some confusion about ‘ownership.’ For example, the Reserve Banks issue shares of stock to member banks. However, owning Reserve Bank stock is quite different from owning stock in a private company. The Reserve Banks are not operated for profit, and ownership of a certain amount of stock is, by law, a condition of membership in the System. The stock may not be sold, traded, or pledged as security for a loan; dividends are, by law, 6 percent per year."At the top of the list of the 'Top 50 holding companies' (as of mid-2018) of the Federal Reserve System, who would therefore also be the most influential member/ shareholders, are the same commercial banks listed in previous sections, of which Vanguard and BlackRock are – without exception – two of the largest shareholders (as are a substantial number of their partially-owned and controlled companies). Specifically, JP Morgan Chase & Co. (incorporated in New York) was the largest member/ shareholder in 2018 with approximately $2,600 billion in total assets, followed by Bank of America Corporation ($2,300bn, Charlotte NC). The third largest was Citigroup Inc. ($1,900bn, NY), then Wells Fargo & Company ($1,900bn, San Francisco CA), Goldman Sachs Group Inc. ($970bn, NY) and Morgan Stanley ($880bn, NY). The size of the next largest members falls off sharply: the seventh largest (American International Group – AIG) registered total assets of $460bn and the other three had less than $400bn (General Electric Capital Corporation, Bank of New York Mellon Corporation, and U.S. Bancorp). Table 4 lists the largest institutional shareholders of the top ten member/ shareholders (in descending order).
TABLE 4
Focal Points And Extended Networks Of Corporate Ownership And Control: An Overview Of The Centralization And Projection Of Financial Power
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This compilation of the five largest institutional shareholders of each of the top ten member/ shareholders of the Federal Reserve System provides further details and clues about relative and absolute structural power at the core of the financial system from a related but nonetheless very distinctive and significant perspective. Considered from this angle, the extreme concentration of raw financial power and inherent structural or systemic influence at the top is confirmed, and it may also be possible to glean further insights into the relative weighting or power of the main financial corporations and entities that are definitely within the first or second layers of the nucleus of financial ownership and control from their respective ownership stakes in the main member banks.
Perhaps most significant of all, Vanguard's status as 'first among equals' – by a substantial margin – is confirmed. It is among the five largest institutional shareholders of all ten of the largest member banks of the Federal Reserve (and is the largest or second largest shareholder in all but one, in which it is third place). BlackRock and State Street are also among the five largest shareholders of all ten member banks (usually around third place in the pecking order), followed by Fidelity MR and Berkshire Hathaway (both are among the largest shareholders of five of the ten member banks – it is however noteworthy that the latter is the largest shareholder of four of them), while Capital RM is among the top shareholders of three. Between them, 'The Big Five' hold a total of between 17% and 40% of the stock (averaging just under 30%). The other major shareholders on the list don't appear more than once (Goldman Sachs, Mitsubishi, Harris Associates, Viking GI, Dodge & Cox, T Rowe Price and Massachusetts Financial Services Co.).
Please go to South Front to read the entire analysis.
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