This is with reference to Ajit Balakrishnan’s series (‘Worldwide Financial Crisis’, November 14, 15, 20) and reader Tedd Potts’ comment on it (November 17) wherein the author of the letter implies that the US Federal Reserve is a government body (“....Federal Reserve or any other government body....”). This is by no means the case.
The US government has extremely limited leverage over the Fed, with the US President’s role confined to appointing its chairman and seven member board and the US Congress’ role being confined to their confirmational hearing. Once appointed, the chairman and members have a 14-year tenure versus a four-year term for the US President and two-years for a member of the Congress!
Most important, the Fed is far from being fully state-owned like our RBI or the Bank of England (on which the RBI is modelled), or, say. the Bundesbank of Germany. Even the Bank of Japan is 55 per cent (i.e. majority) state-held. The Fed’s shareholding pattern, however, remains a closely held secret (almost like the formula of Coca Cola!), since it was constituted nearly a century ago. Many have reasoned, with a fair amount of justification, that it is a cabal of major western (mainly US) banks, among them the now-defunct Lehman Brothers.
Thus the Fed can by no means be construed to be a government, or even a quasi-government body. It is, by its very composition an instrument of extreme ‘laissez faire’, with state control being minimal or nominal — if at all. This reinforces the point made by Ajit Balakrishnan, the author of the series.
Rajiv Sen, Bareilly