The Federal Reserve is the central bank of the United States. It was created in 1913 and has two mandates: maximum employment and stable prices (2% inflation target). It controls the economy primarily through: the federal funds rate (the interest rate banks charge each other for overnight loans, which cascades to every other interest rate), open market operations (buying and selling government bonds to inject or withdraw money from the system), and reserve requirements (how much cash banks must hold — reduced to 0% in 2020).

When the Fed lowers interest rates: borrowing becomes cheaper, asset prices rise (stocks, real estate), saving becomes less rewarding, and economic activity accelerates. This benefits: borrowers, asset owners, and the financial industry. When the Fed raises rates: borrowing becomes expensive, asset prices fall, saving becomes more rewarding, and economic activity slows. This benefits: savers with cash and hurts: borrowers and asset owners.

The Fed is technically independent from the government but its chair is appointed by the president. The 12 Federal Reserve Bank presidents come from the banking industry. The institution that controls the money supply is structurally connected to the industry it regulates. This isn't a conspiracy — it's a documented structural feature that critics across the political spectrum have noted.

Quantitative Easing (QE): after 2008 and again in 2020, the Fed purchased trillions of dollars in government bonds and mortgage-backed securities — effectively creating money to buy financial assets. This inflated asset prices, benefiting asset owners disproportionately. The Fed's balance sheet went from ~$900B in 2008 to ~$9T in 2022. The wealth effect (rising asset prices making owners feel richer and spend more) was the stated transmission mechanism — but it primarily benefited those who already owned assets.