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What Are the Responsibilities and Functions of the Federal Reserve System?

By    |   Sunday, 14 June 2015 05:49 PM

The Federal Reserve System is responsible for maintaining the health of the banking and financial systems. It oversees the financial services industry and works to keep prices stable by initiating monetary policies based on forecasts of the economic future.

The Fed's Board of Governors administers consumer protection regulations, oversees payments between banks, sets reserve requirements for depository institutions and approves changes to discount rates, according to federalreserveeducation.org.

The Fed monitors economic conditions and enacts policy measures, such as raising or lowering interest rates, to avoid possible economic pitfalls ahead. In recent years, it has acted to boost the financial stability of banks through measures including purchasing long-term Treasury bonds and mortgage-backed securities to prevent economic chaos within the banking system.

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Since the Fed was set up as a non-profit institution, any profits it makes through its holdings are given to the Treasury or other government agencies at the end of the year, according to Business Insider.

The Federal Reserve System began in 1914 following the Federal Reserve Act of 1913. It works within the federal government as an independent entity. Its monetary policies are enacted without the approval of the president or Congress, but Congress oversees the Fed’s activities and can make adjustments to actions through legislation. Congress must also approve the appointment of a Fed chairman named by the President.

The public may think of the Fed as the Federal Reserve Board, also known as the Board of Governors, but bank committees and councils are also involved in its monetary policies.

The Board of Governors makes monetary policy through the Federal Open Market Committee, which also includes the president of the Federal Reserve Bank of New York and presidents of other Reserve Banks. The committee meets eight times a year to discuss the economic outlook and consider policy options.

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The Federal Advisory Council, the Consumer Advisory Council, and the Thrift Institutions Advisory Council provide input on policy. Members of the councils come from the Reserve Bank districts throughout the country. These Reserve Banks have advisory committees as well.

The Federal Reserve System has a network of 12 Reserve Banks in New York, Philadelphia, Boston, Cleveland, Chicago, Richmond, Atlanta, St. Louis, Kansas City, Minneapolis, San Francisco and Dallas. The Reserve Banks store currency and process payments through the banking system under the Federal Reserve regulations.

Some 3,000 member banks are associated with the Federal Reserve. They hold stock for the Reserve Banks in their particular districts. About 17,000 commercial banks, savings banks, savings and loan associations, and credit unions operate under Federal Reserve guidelines and payment services but are not actual members of the Federal Reserve.

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The Federal Reserve System is responsible for maintaining the health of the banking and financial systems. It oversees the financial services industry and works to keep prices stable by initiating monetary policies based on forecasts of the economic future.
Federal Reserve, functions, responsibilities
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2015-49-14
Sunday, 14 June 2015 05:49 PM
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