re: The Federal Reserve is running huge losses. Who pays for it?

You’re correct in that the Fed is not a traditional private commercial bank. It’s private in the sense that its stockholders are commercial banks and thus it is not owned by the government. It is also not on the federal budget.

The Fed’s structure was a political compromise between the rural, sparsely populated states and the densely populated, more industrial states when the Federal Reserve Act was passed in 1913.

The rural states feared a government owned central bank would only benefit the more populous, heavily industrialized states. So the Act created 12 Federal Reserve districts across the U.S. with each Fed district bank serving a specific geographical area. The commercial banks within each district would buy stock in just its own Fed district bank thus providing the initial capital for each district bank. The government would own no stock in any Fed district bank.

Ever wonder why the rural, farming state of Missouri has TWO Fed district banks and the financial center state of New York only has one Fed district bank? It’s because the Chairman of the senate finance committee which had to approve the bill creating the Fed in 1913 was a senator from Missouri.

The structure was intended to prevent a concentration of financial power while still creating a lender of last resort function along with a way to implement monetary policy while attempting to avoid political interference as much as possible.