Lewis v. United States was brought by a man named, naturally enough,
Lewis, who was injured by a vehicle owned and operated by the Los Angeles Branch
of the Federal Reserve Bank of San Francisco. (The Ninth Circuit didn't say what
kind of vehicle Lewis was injured by, but I like to think it was a triple-trailer
loaded with cancelled checks. One of the things Federal Reserve banks do is ship
huge quantities of cancelled checks around the country.)
Lewis then sued the United States in federal court under the Federal Torts
Claims Act. The trial court, and then the Ninth Circuit, dismissed the case on
the grounds that the Federal Torts Claims Act didn't apply because Federal
Reserve banks don't actually belong to the federal government but are, as the
Ninth Circuit put it, "independent, privately owned and locally controlled
corporations."
The Ninth Circuit had a point: each Federal Reserve bank is a separately
chartered corporation owned by commercial banks. The commercial banks appoint six
of the Federal Reserve bank's nine directors (the other three are appointed by
the Federal Reserve Board, so the government keeps a finger in this pot) and the
directors enact bylaws, appoint officers, and supervise daily banking activities.
Given these facts, the Ninth Circuit came up with the same standard, white-bread
result any court would have reached, and people who go around claiming that
Federal Reserve banks are privately owned are right. The banks are privately
owned, at least for purposes of the Torts Claims Act.
But this decision doesn't set my juices flowing, and not just because I wasn't
the one who was run down by a truckload of cancelled checks. It's because the
decision doesn't have much to do with who actually controls monetary policy in
the United States. All the Ninth Circuit decided was that the federal government
did not have enough ownership in the Federal Reserve Bank of San Francisco to
trigger jurisdiction under the Federal Torts Claims Act.
It's as if I were run down by a tow truck owned and operated by the Shell
station on the corner, and decided to go to Holland to sue Royal Dutch Shell. The
worthy Dutch jurists would undoubtedly point out that, since Shell doesn't own
the filling station in question, I should have sued the filling station back home
in state court. They would explain their decision by pointing out that the
station was owned by local investors who hired their own employees and made their
own rules about day-to-day operations, that the owners of the station set the
price of gas at the pump, and that the owners of the station were responsible for
deciding whether people's windshields got swabbed as part of the deal and whether
customers had to pay for the air squirted into their tires. And the Dutch court
would be right. But none of it would mean that my local pump-jockey secretly
controlled Shell Oil and was calling the shots down at the International Energy
Cartel.
As fervently as I might wish it different, it's the same with Federal Reserve
banks: the fact that they enact their own bylaws, appoint their own officers,
conduct general banking business, and load cancelled checks onto trucks with
forklifts doesn't mean they have any say in federal monetary policy. All it means
is that their job is to get the rest of us to buy the gas the federal government
puts out.
