The Money Masters is a 1996 documentary film that discusses the concepts of money, debt, taxes, and describes their development from biblical times onward.

Its main points were summarized by a redditor thusly:

Essentially this documentary talks about how the Federal Reserve is not Federal and has no reserves. Its simply a private monopoly on money creation granted by the U.S. Government. The documentary shows many examples of how centrally planned money creation rarely benefits the nation as a whole, and usually ends badly.

I saw this film myself many years ago, but I remember realizing that I don't know enough about the subject to understand if it's nonsense or not.

Is it true that the Federal Reserve is not federal and has no reserves?

Edit: I just watched bits of it. The film is 3.5 hours long, but its main argument seems to be in the first 10 minutes. It mainly accuses the Fed of manipulating the money supply in order to create business cycles and benefit those private interests that allegedly control it.

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    $\begingroup$ This is just a suggestion (and I have not seen the documentary). But rather than ask whether the movie is non-sense or not, pick a theme or question the movies continues to circle around throughtout and present that question and the movies answer here. Otherwise people here will have to watch the movie and based on some idiosyncratic choice of theme to focuse on decide whether it is non-sense. Then they come back and say: No, it is not nonsense or Yes, it is nonsense - would that make you feel wiser? $\endgroup$ Jun 7, 2021 at 6:02
  • $\begingroup$ @JesperHybel OK thanks $\endgroup$
    – MWB
    Jun 7, 2021 at 6:08
  • $\begingroup$ Strange claim that the Federal reserve is not federal, it is clearly a governmental institution. Maybe they mean its independence in that it's not directly controlled by the executive or legistlative? $\endgroup$
    – Papayapap
    Jun 7, 2021 at 7:53
  • $\begingroup$ FYI: There are a lot of (old) conspiracy theories about the Federal Reserve, just like there are (equally old) conspiracy theories about the Trilateral Commission, the United Nations, etc. More info available on Wikipedia's List_of_conspiracy_theories $\endgroup$
    – Daniel
    Jul 8, 2021 at 3:11
  • $\begingroup$ Suggest changing the title: "Is it true that the Federal Reserve is not federal and has no reserves?" as most people haven't seen this particular film $\endgroup$
    – user253751
    Apr 20, 2023 at 12:36

3 Answers 3


Is it true that the Federal Reserve is not Federal and has no reserves?

Both claims are blatantly false.

On Reserves

Fed literally has power to create new reserves for other banks or for its own spending from nothing. Not only, Fed obviously has reserves which you can easily confirm just by looking at a data (see Fed data on amount of reserves held), but it can never even run out of the reserves (at least as long as it does not run out of electricity, since their creation nowadays involves computers - they are literally created at a keystrokes of keyboard).

On 'Federaleness' of Fed

Fed is a federal government institution. So it is clearly federal.

I think this is based on misunderstanding what fed is because of its unique set up. In most countries central banks had their initial capital underwritten by governments but in the US Fed capital is underwritten by private banks. In fact private commercial banks operating in the US are even obliged to hold stocks of Fed member banks (see explainer here).

However, the ownership of shares in Fed member banks carries no voting rights, banks that own these shares are not allowed to publicly trade them, these shares only entitle them to small dividend (to compensate them for providing capital to Fed) that is well below what the banks could earn if they would take that money and buy some other assets and equities (see here) so it is not very good deal for private banks.

In addition, the Fed leadership is picked up by the U.S. government (as you can see in this explainer):

Within the System, certain responsibilities are shared between the Board of Governors in Washington, D.C., whose members are appointed by the President with the advice and consent of the Senate,

Lastly, all profits that Fed earns have to be forwarded straight back to the U.S. treasury. For example, most recently in 2020 Fed sent all its \$88.5 Billion profits to the U.S. treasury and it does it every year (see here and here).

Summa summarum, even though Fed is built on private capital, it would be absurd to say it is not a federal institution, when:

  1. Holders of that private capital have no voting rights and say in how Fed is being run
  2. Federal government picks all top figures of Fed (even though Fed is supposed to be politically independent like U.S. supreme court the same way as justices are picked by president Fed leadership is picked too by president).
  3. All profits of this institution must go directly to U.S. treasury.

Saying that Fed is not federal institution would be the same as saying, in the following hypothetical, U.S. congress would not be part of federal government if they would meet in some private offices, where lease specifies that landlord cannot evict members of congress and they are all guaranteed some fixed cheap rent for their offices, instead of meeting in the United States Capitol. That would obviously be an absurd statement.

  • $\begingroup$ I would add that the Federal Reserve system was created by an Act of Congress as a federal institution to serve public purpose as the monetary authority of the United States. The public policy dual mandate of the Fed is to promote low inflation and full employment. However the economic literature typically regards these two mandates as a tradeoff one against the other where rising unemployment tends to curb inflation and full employment tends to fuel rising inflation. $\endgroup$ Jun 8, 2021 at 1:57
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    $\begingroup$ "small dividend" -- could you be more specific? $\endgroup$
    – MWB
    Jun 15, 2021 at 21:43
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    $\begingroup$ @bobcat it is either 6% or current 10y treasury rate - it is always the smaller rate. So given current 10y treasury rates are near zero almost nothing or even possibly nothing in some years, but it varies given that it is always the lesser of the two numbers $\endgroup$
    – 1muflon1
    Jun 15, 2021 at 22:29

"the Federal Reserve is an independent agency" - Alan Greenspan in an interview with Jim Lehrer



The federal reserves own web site states this as well: https://www.stlouisfed.org/in-plain-english/who-owns-the-federal-reserve-banks

Member banks hold stock in the Federal Reserve Banks and earn dividends.


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