Who Owns the Federal Reserve: Governors, Stock, and Earnings

Nobody owns the Federal Reserve the way a shareholder owns a company. Congress created it through the Federal Reserve Act of 1913 as a hybrid: a Board of Governors in Washington that operates as an independent federal agency, and twelve regional Federal Reserve Banks whose stock is held by private member banks under legal restrictions that strip away almost every right normally attached to stock. The result is a system with a public governing body at the top and a private-sector capital base at the regional level, with control of policy sitting firmly on the public side.

The Public Side: The Board of Governors

The Board of Governors is the central governing body of the Federal Reserve System and functions as an independent federal agency. It has seven members, each appointed by the President and confirmed by the Senate to a fourteen-year term.¹ The terms are staggered so one expires every two years, which keeps political appointees involved without letting any single administration reshape the Board at once.

The President also picks the Chair and Vice Chairs from among the sitting governors, subject to Senate confirmation, for four-year terms. Statute shapes the mix in other ways too: no two governors can come from the same Federal Reserve district, and at least one must have primary experience with community banks holding under $10 billion in assets.¹

The Board oversees the broader system, approves regional bank budgets, and reports to Congress through regular testimony and published financial statements.² Its operating costs are funded by assessments on the regional Reserve Banks, not by congressional appropriations.

The Private-Side Piece: Member Bank Stock

The twelve regional Reserve Banks are organized to look somewhat like private corporations. Commercial banks that belong to the Federal Reserve System, called member banks, are required by law to hold stock in their regional Reserve Bank. This isn’t an investment they chose to make. It’s a legal condition of membership.

Every nationally chartered bank must join the system and subscribe to its regional Reserve Bank’s stock.³ State-chartered banks can apply if they meet conditions relating to financial condition, capital, management, and community needs.⁴

The subscription equals six percent of a member bank’s paid-up capital and surplus.⁵ Banks pay about half upfront; the rest stays on call, meaning the Board of Governors can demand it when needed.⁶ As a bank grows or shrinks, its required holding adjusts with it.

Why That Stock Isn’t Ownership

Holding Federal Reserve stock is nothing like owning shares in a public company. The Federal Reserve Act removes almost every right normally attached to equity.

Member banks cannot sell, trade, or pledge the shares as collateral. Federal law bars any transfer or hypothecation of Federal Reserve Bank stock.⁶ The shares stay locked to the member bank that subscribed to them. They cannot be bought by outside investors, hedge funds, or foreign entities.

There is no residual equity claim either. If a member bank leaves the system or is liquidated, it surrenders its stock and gets back only the par value of its paid-in subscription plus a small accrued amount, not a share of accumulated earnings or assets.⁶ If an entire Reserve Bank were ever dissolved, any surplus left after debts, dividends, and return of par value would go to the United States, not to the shareholders.⁷ The stock behaves more like a participation receipt than an ownership stake.

Who Actually Controls Federal Reserve Decisions

The most visible policy decisions, including the target range for the federal funds rate, are made by the Federal Open Market Committee. The committee has twelve voting members. Seven are the presidentially appointed governors. The remaining five are regional Reserve Bank presidents: the president of the New York Fed holds a permanent voting seat, and the other four rotate annually among the remaining eleven regional bank presidents.⁸

The seven-to-five split matters. Publicly appointed governors always hold a voting majority on the committee that sets monetary policy.⁹

The regional boards are structured the same way. Each Reserve Bank has nine directors split into three classes. Three Class A directors are elected by member banks to represent banking. Three Class B directors are elected by member banks but must represent the public and cannot be officers, directors, or employees of any bank. Three Class C directors are appointed by the Board of Governors to represent the public and cannot own stock in any bank.¹⁰ The Chair and Deputy Chair of each regional board come from the Class C directors, the ones with no banking ties.

Six of the nine seats on every regional board are either barred from banking affiliations or required to represent the public. Bankers never hold a majority.

Where the Fed’s Earnings Go

Member banks do receive a statutory dividend on the capital they’re required to keep locked in Federal Reserve stock, but the rate is capped. For banks with total consolidated assets of $13.182 billion or less (the 2026 inflation-adjusted threshold), the dividend is six percent of paid-in capital annually.¹¹ For larger banks, the dividend is the lesser of six percent or the most recent high yield on the ten-year Treasury note, which in recent years has often been well under six percent.¹²

After dividends and operating expenses, remaining earnings go into a surplus fund capped in the aggregate at roughly $6.8 billion across all twelve Reserve Banks. Anything above that cap is transferred to the U.S. Treasury for deposit in the general fund.¹³ In profitable years, those transfers have run into the tens of billions of dollars, making the federal government the primary financial beneficiary of Fed operations.

That flow isn’t guaranteed every year. Since 2022, rising interest rates have pushed the Fed’s interest expenses on bank reserves above the income earned on its Treasury and mortgage-backed bond holdings. By the end of 2024, the system had accumulated about $216 billion in cumulative operating losses, recorded as a “deferred asset” on its balance sheet.¹⁴ Remittances to the Treasury have been largely suspended during this stretch, though some individual Reserve Banks with positive earnings have made smaller payments. The deferred asset represents earnings the Fed must post before full remittances resume. The underlying legal structure directing excess earnings to the public hasn’t changed.

So when people ask who owns the Federal Reserve, the closest honest answer is that the public governs it, private member banks fund a portion of its regional capital under compulsion and with almost no ownership rights, and the Treasury collects whatever profits the system produces.

1
Office of the Law Revision Counsel. 12 USC 241 – Creation; Membership; Compensation and Expenses
2
Federal Reserve Board. The Fed Explained – Who We Are
3
Office of the Law Revision Counsel. 12 USC 222 – Federal Reserve Districts; Membership of National Banks
4
eCFR. Membership of State Banking Institutions in the Federal Reserve System (Regulation H)
5
Office of the Law Revision Counsel. 12 USC 282 – Subscription to Capital Stock by National Banking Association
6
Office of the Law Revision Counsel. 12 USC 287 – Value of Shares of Stock; Increase and Decrease of Stock
7
Office of the Law Revision Counsel. 12 USC 290 – Use of Earnings Transferred to Treasury
8
Office of the Law Revision Counsel. 12 USC 263 – Federal Open Market Committee; Creation; Membership
9
Federal Reserve Board. Federal Open Market Committee
10
Federal Reserve Board. Federal Reserve System Boards of Directors
11
Office of the Law Revision Counsel. 12 USC 289 – Dividends and Surplus Funds of Reserve Banks
12
Federal Register. Federal Reserve Bank Capital Stock
13
Federal Reserve Board. Federal Reserve Act – Section 7. Division of Earnings
14
Federal Reserve Board. Combined Financial Statements of the Federal Reserve Banks, 2024