This issue is very important and often misunderstood. Let's analyze it systematically and professionally:

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1. The Federal Reserve's Position: Independent from the Government, yet Deeply Embedded in the Government System

1.1 The Federal Reserve is an "independent federal agency"

Official Full Name: Federal Reserve System, established in 1913 (Federal Reserve Act).

It is neither a completely private enterprise nor a completely government department, but a **"government-authorized, independently operating" hybrid system**, with the following characteristics:

Attributes Description

Goals set by Congress To "maximize employment, ensure price stability, and moderate long-term interest rates" (dual mandate)

Accountable to Congress Required to report policies to Congress annually and accept inquiries

Strong Operational Independence The government cannot directly intervene in its interest rates, quantitative easing, or monetary policy decisions

The President has no direct command authority The President cannot dismiss the Federal Reserve Chairman or interfere with interest rate decisions

Profits Remitted to the Treasury Most of the Federal Reserve's operational surplus is remitted to the Treasury annually (approximately $100 billion in 2022)

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1.2 Structure of the Federal Reserve

Composition Description

The Federal Reserve Board of Governors Located in Washington, with 7 members, nominated by the President and approved by the Senate, serving a term of 14 years. The Chairman (such as Powell) is appointed by the President for a term of 4 years, but the President cannot dismiss them at will.

12 Regional Federal Reserve Banks Similar to "regional branches of the central bank", but with a shareholder structure. They are jointly owned by commercial banks in the region but cannot sell or control policy.

Federal Open Market Committee (FOMC) Actually determines interest rates and quantitative easing. 7 board members + 5 regional bank presidents take turns voting.

⚠️ Although some banks hold "equity", this is merely a systemic arrangement and does not equate to control rights.

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2. Who "controls" the Federal Reserve? Conspiracy Theories vs. Reality Structure

2.1 Conspiracy Theory: "The Rothschild family or Jewish financial groups control the Federal Reserve"

This is a widely circulated statement, often seen on social media or extreme political viewpoints. Reasons include:

• The Federal Reserve is not fully government-owned;

• Major Wall Street banks were rescued during the financial crisis, raising suspicions of "conflicts of interest";

• Some famous financiers (such as Paul Warburg) participated in the early design of the Federal Reserve, with a background in Jewish heritage;

• The immense influence of families like the Rothschilds and Morgans in the capital markets of the 19th century.

👉 But this is an overly simplistic statement and lacks empirical data support.

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2.2 Reality Mechanism: The Federal Reserve is independent but subject to multiple checks and balances

Control Dimensions Actual Situation

The President Can nominate the Chairman and board members, but cannot dismiss them at will; actual influence is limited.

Congress Has legislative power to change the structure and goals of the Federal Reserve (such as terminating its "independence"), but has never done so.

The Banking Sector (especially Wall Street) Exerts strong pressure on policies, for example, through media and lobbying, but has no formal control.

Global Financial Markets Federal Reserve policies must consider market reactions, as financial markets have a "soft constraint" effect.

Public and Inflation Pressure When inflation is high or unemployment rises, public opinion and media create immense pressure.

Conclusion: The Federal Reserve is a typical "technocratic bureaucratic agency" that, while not directly controlled by the government, is institutionally constrained by **the President (nominations), Congress (reviews), the market (reactions), and the public (opinion)**.

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3. Why can't the U.S. government and President directly manage the Federal Reserve?

3.1 Reason One: Preventing the Politicization of Monetary Policy

If the President could control interest rates, the Federal Reserve might be used to:

• Lowering interest rates before elections to stimulate the economy (artificial prosperity);

• Unrestricted money printing to finance deficits, causing inflation or currency crises;

• Manipulating financial markets to create short-term electoral effects.

Historically, Nixon's artificial suppression of interest rates and the collapse of the gold standard in 1971 is an example.

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3.2 Reason Two: Institutional Design Guarantees "Credit Independence"

The reason the dollar is a global currency is largely due to the Federal Reserve's independence, which instills market confidence:

"The U.S. will not cover up fiscal deficits by printing money like Latin American countries."

If the Federal Reserve were directly controlled by the President, the credit of the dollar would plummet, global funds might flee dollar assets, triggering a debt crisis.

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4. Summary

Your Question Professional Answer

Who does the Federal Reserve listen to? It listens to itself—formulating policies based on economic data and independent judgment, but reports to Congress and explains to the public.

Who controls behind the scenes? There is no single controlling group; the President's nominations, Senate reviews, and market reactions together constitute a system of checks and balances.

Why can't the President control it? To prevent inflation, protect dollar credit, and maintain long-term stability of monetary policy.

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5. What would happen if the Federal Reserve were no longer independent?

• Rapid depreciation of the dollar;

• Foreign capital reducing holdings of U.S. Treasury bonds, leading to a surge in interest rates;

• Financial market turmoil, with capital fleeing to gold and Bitcoin;

• U.S. fiscal situation becoming unsustainable, potentially leading to hyperinflation under fiscal dominance (like Argentina/Turkey model).

This is also why even if the President is dissatisfied with the Federal Reserve (as Trump once angrily criticized Powell), they ultimately can only exert pressure, not "command".

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