Federal Reserve notes
Represent A First Lien On All The Assets Of The Federal Reserve Banks, and on
the collateral specifically held against them. Public Notice
"Federal
Reserve notes are legal tender currency notes. The twelve Federal Reserve Banks
issue them into circulation pursuant to the Federal Reserve Act of 1913. A
commercial bank belonging to the Federal Reserve System can obtain Federal
Reserve notes from the Federal Reserve Bank in its district whenever it wishes.
It must pay for them in full, dollar for dollar, by drawing down its account
with its district Federal Reserve Bank.
Federal Reserve
Banks obtain the notes from our Bureau of Engraving and Printing (BEP). It pays
the BEP for the cost of producing the notes, which then become liabilities of the Federal Reserve Banks, and
obligations of the United States Government.
Congress has
specified that a Federal Reserve Bank must hold collateral equal in value to
the Federal Reserve notes that the Bank receives. This collateral is chiefly
gold certificates and United States securities. This provides backing for the
note issue. The idea was that if the Congress dissolved the Federal Reserve
System, the United States would take over the notes (liabilities). This would
meet the requirements of Section 411, but the government would also take over
the assets, which would be of equal value. Federal Reserve notes represent a first lien on all the assets of the
Federal Reserve Banks, and on the collateral specifically held against them.
Federal Reserve notes are not redeemable in gold,
silver or any other commodity, and receive no backing by anything. This has
been the case since 1933. The notes have no value for themselves, but for what
they will buy. In another sense, because they are legal tender, Federal Reserve
notes are "backed" by all the goods and services in the
economy."
The 100 year FED
charter question.
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