Could someone explain the process of issuing money and the fed?

Recently, I was surprised to find out that the "Federal Reserve" (despite the word federal in its name) is not owned by the federal government. Instead, it's controlled by the country's major banks. So, those banks control our economy through the Fed Chairman's actions. However, I still do not truly understand where the rubber hits the road. With that I mean that I do not know how money is issued and injected into the economy. Do the banks borrow the money from the federal government at the over night lending rate? If so, what do they use for collateral? gold? Didn't the gold standard cease to exist years back.

The Fed is actually owned by both the government and part of the public. There are twelve government "owned" federal banks and a host of smaller financial institutions that aid the Fed in its policy making.

The banks in this system get money from the reserve based on their demand and need. It is a symbiotic relationship of sorts: the banks need money to give loans and make profits, and the Fed needs to give the money to the banks so it can monitor the economy properly. Some of the money the Fed gives is in the form of loans (e.g. to the private banks), but the Fed's branches get it no strings attached. The private banks do not usually borrow from the Fed; they have their own investors (private citizens) that put their money in the bank or take out loans. If they do borrow money, it is often at the discount rate (see article). The Fed simply stands to serve as a bank for the banks, giving loans (if necessary) and monitoring funds. It also sells securities which is how it regulates inflation and recession and interest rates. Additionally, the most common method of injecting money into the economy is federal spending. How much money the government decides to pay for something can affect the value of the dollar or how much currency is in circulation. If you follow the link I have provided to the Fed, you'll find an excellent article that details the selling of securities as a means to adjust the amount of money in circulation. If the Fed wants more money in circulation, it will buy securities from banks or if it wants less money in circulation, it will sell securities to banks.

This then, is the "collateral" of the banks; they must buy or sell securities and follow the policies of the Fed in order to handle the money. The small banks get the profits from loans and the Fed gets money from processing fees.

The Gold Standard was abolished in America in 1971 and every other country in the world followed their example. You will not find a serious or widely accepted currency that uses precious metal as a monetary standard in the modern world. Modern currency is mostly electronic and even the paper and coin currency has no true backing. Its value depends entirely upon the "faith" of the people in the economy.

The Fed article is long and drawn out, and I think I've given you the important bits but by all means read into it. It's quite interesting. As for the gold standard, I highly suggest you read the currency article. It's short and to the point and very informative, especially concerning the more abstract concept of the non-existent modern monetary standard.

Hope this helps!