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Buy the Fed and get a check

The Federal Reserve System has been in the political spotlight more this election year than in most.

Former presidential candidate Ron Paul provided much of the energy and focus for this with his efforts to audit and abolish the Fed.

How about considering the opposite tack?

If the problem is secrecy, make the Fed more open by selling shares in it to the public.

Retirees are frantic over falling interest rates. Let them if they choose participate in the other side of the equation by taking ownership and receiving income from the Federal Reserve’s actions.

In 2011 the Federal Reserve sent the U.S. Treasury profits of $76.9 billion.

That’s quite a chunk of change.

How would retirees, or anyone else for that matter, participate?

Well, take a page out of Alexander Hamilton’s book. When he founded the Bank of the United States in 1792, the government took 20 percent of the $10 million in stock and private owners took 80 percent.

This was America’s first central bank and the government only had a 20 percent share. But there was no mistaking who had the most influence.

To be a little more explicit, let’s just say that the government should sell 49 percent of the Federal Reserve to investors and keep 51 percent for absolute control.

If you place a value on the whole institution presently at 15 times its income, you would get a value of $1.15 trillion.

I am rounding, so you don’t have to see all the decimal places.

Take 49 percent of that and you get $564 billion for the public. The government’s shares are would be worth $587 billion.

That valuation is a bit richer than banking shares used to be valued at before the crash, but since it is The Bank and the risk of financial failure is off the table, it would deserve a higher valuation.

After the sale, the stock would trade, there would be earnings calls on financial television and elsewhere and dividends declared – but this time they would be benefitting specific individuals rather than taxpayers in general for the 49 percent that would be in investor hands.

Crazy? Probably.

But think what a boon it would be for investors.

They could create a two asset investment portfolio, Fed stock and gold.

Every time Quantitative Easing occurred, the price of gold would rise and they would get the dividend check from the other side of the ledger.

Sweet.

Then these smart gold owners would be clamoring to save the Fed instead of abolishing it.

Buzz blogger Dave Harper is editor of the weekly newspaper “Numismatic News.”

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One Response to Buy the Fed and get a check

  1. michael says:

    I love your idea but the government does not like to share.If they did sell shares this would eliminate most of the problems they face on a daily basis. Also they should buy everyone’s stash of pennies at a profit to the public of 1 penny extra for every 2 turned in and this would give them a stash of pennies for cheaper than they can produce them. Who wouldn’t give up 2 cents to get three back. Do this for 15 days and see what happens

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