What is the value of one share of Federal Reserve Stock?
A. This is a trick question, the Fed has no stock. B. $1,000 C. $100 D. $20
The correct answer and explanation is:
The correct answer is B. $100.
The Federal Reserve has a unique structure in which it is composed of both public and private elements. While the Federal Reserve is an independent government institution, it has stockholders, which are private member banks that own shares in the Federal Reserve Banks.
Each member bank must purchase stock in its regional Federal Reserve Bank to become a member of the Federal Reserve System. This stock is not like typical stock, in that it cannot be traded or sold. It also does not grant voting rights for decisions on the operation of the Federal Reserve.
The value of one share of Federal Reserve stock is $100. The stock pays a fixed dividend, which is set at 6% annually. However, the purpose of owning this stock is not for speculative investment. Rather, it reflects the bank’s contribution to and participation in the broader Federal Reserve System, which regulates and provides stability to the national economy.
The Federal Reserve stock cannot be transferred to non-member banks, and member banks are required to hold the stock for as long as they are part of the Federal Reserve System. If a bank were to leave the system, it would receive a refund for its shares based on the original purchase price.
Because this stock is not available for public trading, and the value remains fixed at $100 per share, it is very different from typical shares in publicly traded companies. The dividend of 6% is guaranteed, but it does not confer any control or influence over the monetary policy of the United States.
Thus, the stock serves more as a means of providing capital for the regional Federal Reserve Banks, not as an investment vehicle for making profits.