In response to Elon Musk’s post on X (formerly Twitter) falsely claiming that the Federal Reserve (“the Fed”), the independent central bank in charge of protecting the entire United States economy, is “absurdly overstaffed,” Congresswoman Maxine Waters (D-CA), the top Democrat on the House Financial Services Committee, issued this fact sheet to educate him and the public on what the Federal Reserve does and why it’s vital to the functioning of the American economy.

As has been the case with other financial regulators, the Fed has been at the center of constant attacks by co-President Elon Musk and President-elect Donald Trump, as they prepare to establish the Department of Government Efficiency (DOGE) initiative to cut funding for federal government programs and eliminate Medicare and Social Security in order to fund tax breaks for wealthy corporations and billionaires.

What the Federal Reserve Does:

The Fed is the United States’ central banking system and the most powerful economic institution in the world. The Fed’s core responsibilities include:

• Monitoring economic developments and conducting monetary policy to combat inflation and support economic growth;
  
  
• Promoting financial stability, including providing emergency loans to banks and other institutions during periods of stress, like the COVID-19 pandemic;
  
  
• Supervising and regulating thousands of banks and other financial institutions, ensuring they comply with all applicable laws;
  
  
• Operating a variety of payment systems, like Fedwire that helps banks move trillions of dollars every business day for millions of consumers and businesses; and,
  
  
• Serving as a fiscal agent for the U.S. government, providing a range of services including maintaining Treasury’s operating account, facilitating government payments, and even processing food coupons as well as U.S. postal money orders.
  
  

How the Federal Reserve Helps the Economy:

The Fed’s responsibility to promote “full employment” means that the Fed must make it a priority to ensure unemployment is low. Under Democratic leadership, unemployment remained at historic lows— below 4% for the longest stretch in 50 years. Now, economists warn that Trump’s proposed trade policies could lead to millions of Americans losing their jobs . If co-President Elon Musk carries out his plan to undercut the Fed, there would be no agency responsible for protecting working-class families from skyrocketing levels of unemployment.

At the same time, the Fed has a responsibility to guard our economy against inflation and keep prices as low as possible for American families. We are still bearing the burden of high prices following the COVID-19 pandemic and Russia’s war in Ukraine, but the Fed has ensured those increases have not gotten even more out of hand. With the Fed’s hard work since the pandemic, we have seen inflation drop from over 9% to under 3%, and the U.S. economy has fared much better than the rest of the global economy. Again, economists warn Trump’s proposed trade policies will wreck supply chains for the goods we depend on as a nation, making goods more expensive. Undermining the Fed would only make things worse.

The Federal Reserve Is Not Funded by Taxpayers:

Unlike expenses at federal agencies like the State Department or the Pentagon, not a single penny of the Fed’s spending comes directly from American taxpayers. The central bank is an independent agency that funds itself primarily through interest income from securities it buys as part of its monetary policy rather than relying on congressional appropriations to operate. The Fed’s net operating expenses for 2024 are budgeted to be $7.1 billion, which amounts to roughly 0.1% of the Federal government’s budget. In fact, the Fed’s revenue often has covered its expenses, allowing the Fed to send its excess earnings to the U.S. Treasury. Between 2012 and 2021, the Fed sent more than $870 billion to the Treasury.

What’s Really Happening:

President-elect Trump has made clear his plan to conduct mass deportations, impose 25% tariffs on goods from Mexico and Canada, and threaten additional tariffs on products from China and elsewhere. These actions will certainly push the U.S. into the throes of a nasty trade war and push inflation through the roof. Given that the Fed’s job is to tackle inflation they would have to raise interest rates in response. This will inevitably raise prices for American families and make it that much harder to afford basic necessities like food, housing, and healthcare.

It seems Elon Musk is laying the groundwork to deflect blame from the incoming Administration’s disastrous economic policies and to direct the American people’s inevitable frustration toward the Fed instead. Meanwhile, Trump has tried to deny he supported Project 2025, however he is hiring its authors to fill senior positions while plotting to advance its radical policies. It is no surprise then that his co-President has claimed the Fed is overstaffed when he actually wants to enact Project 2025’s outlandish plan to end the Fed, sending the U.S. back to a 19th century economy.

When Trump says the Fed’s monetary policy decisions are decided by flipping a coin or when Musk claims that the Fed should be replaced with a Magic 8 ball, they are implying that economics is a game of chance and that the outcomes of the policy decisions they will be making can’t be known. Nothing could be further from the truth.

The truth is, both Trump and his billionaire co-President are more than happy to gamble away the economic prosperity of working families while advancing policies that only help their billionaire friends get even richer, and they can’t even be bothered to accept responsibility for it. This isn’t what the American people asked for.

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