Private Sector RRFC Solution to Disparities referencing the FED, 1930-50 Resource Finance Companies, LBO’s Assets, Ruby Payne, Harris Rosen and more.

Per TDW, Grok AI, your FED expertise has been very helpful. We are through less than 10% of the questions. From your comments and mine I have created FED Set documents 1, 2 and 3 parts 1-3. They are posted on X and SelfGrowth.com. Lets move on to the next questions making up FED Set 4. Before we get into any questions we are left with the position in letter 18 to the FED that the FED backstop must work with the private sector RRFC because the of the solution’s size, depth and breath going right to the heart of full employment in the 21^st century.

Per TDW, could you describe the original relationship between the FED, Wall Street Large “Banks” and Congress? What about main street’s creation of money?

Per Grok AI., the original relationship (1913 era) between the Federal Reserve, Large Wall Street banks, and Congress was a deliberate hybrid public-private compromise, born out of crisis and political horse-trading.

Pre-Fed Context

The United States had no central bank after the Second Bank of the United States charter expired in 1836. The country relied on a fragmented system of state-chartered banks and (after 1863) national banks. This led to repeated banking panics, most dramatically the Panic of 1907, when private banker J.P. Morgan had to organize a private sector bailout because there was no lender of last resort.

Path to Creation

Jekyll Island and the Compromise In 1908, Congress created the National Monetary Commission to study reforms. Its chairman, Republican Senator Nelson Aldrich, organized a secret 10-day meeting in November 1910 at the Jekyll Island Club (an exclusive resort off Georgia).

Key attendees included:

Senator Nelson Aldrich

Bankers: Frank Vanderlip (president of National City Bank, (Rockefeller-linked), Henry Davison (J.P. Morgan partner), Paul Warburg (Kuhn, Loeb & Co.), Charles Norton (First National Bank)

Treasury official A. Piatt Andrew

They drafted the Aldrich Plan — a centralized banker-dominated reserve association. Wall Street largely favored it. Progressives and many Democrats opposed it, fearing too much private banker control. The final Federal Reserve Act (passed by Congress in December 1913 and signed by President Woodrow Wilson) was a political compromise between the Aldrich Plan and more decentralized alternatives (Glass-Owen bill). It created a decentralized hybrid system rather than a single powerful central bank.

Congress created the entire system through legislation. It retains ultimate authority (it can amend or repeal the Act) and oversight via hearings, though the Fed was deliberately given operational independence in monetary policy to insulate it from short-term political pressure.

Board of Governors (in Washington, D.C.): Appointed by the President and confirmed by the Senate — the public/government element.

• 12 Regional Federal Reserve Banks: “Owned” by member commercial banks in their districts. Member banks (especially national banks) were required to buy non-transferable stock in their regional Fed Bank and received limited dividends. These regional banks had significant autonomy in the early years (setting discount rates, etc.).

• Large Wall Street banks had outsized influence in the design phase (via the Jekyll Island drafting and lobbying). They gained:

o A reliable lender of last resort (discount window)

o A more stable system that reduced the risk of runs and panics that had hurt them in 1907

o Influence through the New York Fed (the most powerful regional bank) and their role as major shareholders/members

However, the final structure deliberately diluted pure Wall Street control with the government-appointed Board and regional decentralization to satisfy political opposition.

In short: Congress created it. Large banks helped design it and benefited from the stability it provided. The Fed was never purely “private” nor fully “government-owned” — it was engineered as a public-private hybrid from day one.

Main Street’s Creation of Money

This part is often misunderstood. The vast majority of money in the economy has always been created by commercial banks (the ones serving Main Street — local and regional banks lending to businesses, farmers, homeowners, and consumers), not by the Federal Reserve or the Treasury “printing” currency. This happens through fractional reserve banking, which predates the Fed by centuries: When a bank makes a loan, it does not take money from someone else’s deposit and hand it over. Instead, it simply creates a new deposit in the borrower’s account. That new deposit counts as money in the broad money supply.

Simple example (pre-Fed or post-Fed mechanics are the same):

• You deposit $1,000 in a bank.

• The bank keeps a fraction in reserve (historically 10% or whatever the requirement was) and can lend out the rest ($900).

• When it lends that $900, it creates a new $900 deposit somewhere in the banking system.

• That new deposit can be spent, deposited elsewhere, and the process repeats → the original $1,000 supports several times that amount in new loans and deposits.

• Commercial banks (Main Street banks) create the overwhelming majority of broad money (checking deposits, etc.) through this lending process.

• The Federal Reserve creates the monetary base (physical currency + bank reserves held at the Fed). It influences how much banks can or want to lend via interest rates, reserve requirements (now near zero in practice), and other tools.

• Before the Fed, thousands of banks created money/notes/deposits with very little central coordination — which contributed to the panics.

• After 1913, the Fed provided a backstop and elastic currency, but the core money-creation mechanism (banks lending → creating deposits) remained with commercial banks.

• This is why economists often say: “Banks create money; central banks create reserves.” The Fed was designed in part to manage and backstop this private money-creation process by commercial banks, not to replace it.

Per TDW, thank you for that. Would you agree there is a private sector component to the FED that is special and powerful beyond anything else in the world? Monetary policy set within the world’s strongest middle class would be part of that.

Yes, I agree there is a distinctive private-sector component to the Federal Reserve that is unusual — and in important ways unique — globally. However, it is carefully bounded, not a dominant private takeover, and the overall power of the institution stems more from its hybrid design, the size of the U.S. economy, and the dollar’s global role than from unchecked private control.

The Private-Sector Element is real but Limited and Unusual. The Fed’s structure (unchanged in its core hybrid nature since 1913, with refinements) includes a formal private-sector role that most other central banks lack:

• The 12 regional Federal Reserve Banks are incorporated like private corporations.

• Member commercial banks (the ones on “Main Street” and Wall Street) are required to hold non-transferable stock in their regional Fed Bank, equal to 6% of their capital and surplus. They receive a limited statutory dividend (capped at 6%).

• These member banks elect six of the nine directors on each regional bank’s board (Class A directors represent banks; Class B represent business and agriculture/community interests). The remaining three (Class C) are appointed by the public Board of Governors in Washington.

• Regional bank boards help select the Reserve Bank president (subject to Board of Governors approval).

• This gives private banks a formal governance voice at the regional level — input on operations, supervision, and who leads the regional banks. It is designed to embed banking-system expertise and align incentives with the stability of the institutions the Fed oversees.

• This specific mix is rare worldwide. Most central banks are fully government-owned or have far weaker (or no) formal private ownership/governance links. The Fed’s regional “stock ownership + director election” feature for member banks is distinctive and reflects the original compromise between public oversight and private banking input in a large, decentralized country. Per TDW, private sector run monetary policy in the sense that the tools do not require congress approval is unique to the world and is sort of unstated by Grok AI. Also unstated is the connection of the private sector to freedom and of course money creation.

Per Grok AI., however, important limits exist:

• Stock ownership does not confer normal corporate control, profit motive, or the ability to sell/pledge shares.

• The regional banks are not operated for private profit; any excess earnings go to the Treasury.

• The Fed itself describes its structure as both public and private, with the Board of Governors (public appointees) providing overarching direction.

• Monetary Policy Power: Hybrid, with Public Dominance. Monetary policy (interest rates, QE, etc.) is set by the Federal Open Market Committee (FOMC):

o 7 members of the Board of Governors (appointed by the President, confirmed by Senate) — permanent voters.

o President of the New York Fed — permanent voter.

o 4 rotating presidents from the other 11 regional banks.

The public Board holds the majority of votes and ultimate authority. Reserve Bank presidents bring regional and banking perspectives (shaped in part by their private-sector-linked boards), but they do not control policy. Congress retains ultimate oversight and can change the rules. This hybrid gives the system private-sector input and regional knowledge while keeping final monetary policy decisions under public accountability, per TDW, except when stability requires over-night or over-weekend action and new policy tools have been known to show up without congressional understanding. It is powerful because it operates in the world’s largest economy with the dominant reserve currency — decisions ripple globally. But it is not “private sector control.” Per TDW for major decisions that must be made the FOMC follows the system risks and is way ahead of congress in understanding and timing and courage to act.

Connection to the U.S. Middle Class and Global Power

• The U.S. historically developed one of the world’s largest and most prosperous middle classes, supported by productivity growth, innovation, education, rule of law, and a dynamic private economy. The Fed’s monetary policy operates within that broader economic context, not as its creator. Monetary policy has major effects on the middle class:

o It influences employment, wages, borrowing costs (mortgages, auto loans, business credit), inflation (purchasing power), and asset prices (housing and stocks — which affect wealth inequality).

o Easy policy can support jobs and homeownership but can also inflate asset prices more for those who already own them.

o Tight policy protects against inflation but can slow growth and raise unemployment.

Empirical studies show mixed distributional effects — some policies widen gaps via asset channels, others support broad employment. The Fed’s dual mandate (maximum employment + price stability) is explicitly about broad economic stability that benefits the middle class, but it is not tasked with directly engineering middle-class outcomes or wealth distribution. The combination of:

• A hybrid structure with private banking input,

• Operating inside the world’s largest and historically most dynamic consumer/middle-class-driven economy, and

• The dollar’s global status

…does give the Fed unique global influence compared to other central banks. No other institution has quite this blend of design, scale, and reach. That is factual, not conspiratorial.

Per Grok AI., bottom Line I agree the private-sector component is special and distinctive — the regional bank stock/directorship mechanism has no close global parallel and was intentionally built in. It contributes to the Fed’s power and design tailored to America’s banking system. Monetary policy decisions made in the context of the large U.S. economy amplify that influence worldwide. At the same time, the structure includes strong public checks and balances. The private element provides expertise and regional grounding rather than private domination of policy. This hybrid was the original compromise struck in 1913 between Wall Street interests (stability and input) and public/political concerns (oversight and decentralization). It has evolved but retains that core character.

Per TDW, it has been said that the FED has poverty figures and analysis at the 9 digit zip code levels, is that true?

Per Grok AI, no, that specific claim is not accurate. The Federal Reserve does not have or publish official poverty figures and analysis at the 9-digit ZIP code (ZIP+4) level. That level of granularity is extremely fine (often corresponding to a single block, building, or even a handful of households) and is not feasible or appropriate for statistical poverty estimates due to privacy protections, small sample sizes, and statistical reliability issues.

The Fed does use and analyze poverty-related data at the 5-digit ZIP code level (more precisely, ZIP Code Tabulation Areas or ZCTAs, which approximate postal ZIP codes). This comes primarily from the U.S. Census Bureau’s American Community Survey (ACS), not from the Fed creating its own poverty statistics. A clear public example is a 2015 FEDS Note from the Federal Reserve Board:

• They examined “concentrated poverty” areas defined as ZIP codes where at least 20% of residents live below the poverty line (using Census ACS data from 2008–2013).

• They analyzed financial well-being of people living in those areas by linking it to the Fed’s own Survey of Household Economics and Decisionmaking (SHED).

• They produced maps and tables showing these ZIP codes across the U.S. and compared individual/household poverty status to area-level poverty.

• Other Fed research (from the Board and regional banks) also uses 5-digit ZIP-level data for topics like:

o Relative deprivation (comparing a person’s income to the distribution in their ZIP code).

o Credit scores and financial conditions by ZIP code (e.g., New York Fed work with Equifax data).

o Lending patterns, community development, and economic disparities.

o These are all at the standard 5-digit ZIP / ZCTA level — the same granularity the Census Bureau routinely provides for ZIP-code analysis.

• Why 9-Digit ZIP+4 Doesn’t Happen

• The Census Bureau (the primary source of official U.S. poverty statistics) releases poverty data at national, state, county, metropolitan, census tract, and ZCTA (5-digit ZIP) levels. It does not release it at 9-digit ZIP+4 for privacy and reliability reasons.

• Releasing poverty rates or counts at such a micro level would risk identifying individuals or households.

Per TDW, thanks for that. The workings at the county level between the RFCs and the FED has precedence when the economics need to be restarted and or working capital needs to be created by building on the facts within a zip code area. Such will be discussed in part 2 of FED Set 4.