My understanding of the operation of the United States Federal Reserve Bank is that it invents dollars by a unilateral, unbalanced credit to its own account and then it loans this money to member banks. In some cases this money is loaned to non-bank institutions of the Federal Reserves choosing and that all of these loans, whether to member banks or non-member institutions are secret.

What assurance is there that the Federal Reserve is not giving the money to the various recipients as opposed to lending it?

For example, let's imagine the Federal Reserve "loans" $400 billion to JP Morgan Chase. What is to prevent them from "forgiving" this loan, meaning to allow the recipient to never pay it back? Or, in a similar vein, simply making the terms of the loan essentially infinite, for example making it a zero coupon loan for 5000 years, which is effectively a gift.

What assurance do members of the public have that this is not occurring?


1 Answer 1


According to this official link

Does the Federal Reserve ever get audited?

Yes, the Board of Governors, the 12 Federal Reserve Banks, and the Federal Reserve System as a whole are all subject to several levels of audit and review:
The Government Accountability Office (GAO) conducts numerous reviews of Federal Reserve activities.
The Board's financial statements, and its compliance with laws and regulations affecting those statements, are audited annually by an outside auditor retained by the Office of Inspector General (OIG).
The Board's OIG audits and investigates Board programs and operations as well as those Board functions delegated to the Reserve Banks. Completed and active GAO reviews and completed OIG audits, reviews, and assessments are listed in the Board's Annual Report. (Before 2002, the reviews were listed in the Board's Annual Report: Budget Review.)
The financial statements of the Reserve Banks are also audited annually by an independent outside auditor.
Each week, the Federal Reserve publishes its balance sheet and charts of recent balance sheet trends, as well as provides an interactive guide to the Fed's balance sheet. The balance sheet is included in the Federal Reserve's H.4.1 statistical release, "Factors Affecting Reserve Balances of Depository Institutions and Condition Statement of Federal Reserve Banks."
In addition, the Reserve Banks are subject to annual examination by the Board. The Board's financial statements and the combined financial statements for the Reserve Banks are published in the Board's Annual Report.
See our audit page for more information on all of the above audits and more information on the accounting, financial reporting, and internal controls of the Federal Reserve Board and Federal Reserve Banks.


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