Tags: Money | Federal Reserve | structure

How Is the Federal Reserve System Structured?

By    |   Sunday, 14 June 2015 04:06 PM

The Federal Reserve System consists of a board of governors, member banks and advisory councils. Created by the Federal Reserve Act in 1913, the Fed began operating in 1914 as a monitor of the public and private elements of the financial system.

The Board of Governors, more commonly known as the Federal Reserve Board, acts as the leadership body of the Fed. Seven governors are appointed by the president and approved by the Senate, according to federalreserveeducation.org. The board includes a chairman and vice-chairman appointed to four-year terms with Congressional approval.

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The Fed is an independent entity within the government and is overseen by Congress. It enacts monetary policy without the approval of the executive and legislative branches, but Congress reviews its actions and can make changes to its responsibilities through legislation, according to the Federal Reserve website.

Monetary policies are conducted through the Federal Open Market Committee with the aim of keeping the financial markets and economy stabilized. Voting members of the committee include the members of the Federal Reserve Board, the president of the Federal Reserve Bank of New York and four members from other Reserve Banks. The Fed chairman also chairs the council, which meets eight times a year to discuss the outlook for the economy and options for monetary policies.

The Federal Reserve System includes 12 Reserve Banks headquartered in New York, Boston, Philadelphia, Cleveland, Atlanta, Richmond, St. Louis, Chicago, Kansas City, Minneapolis, Dallas and San Francisco. These Reserve Banks act as the operating arm of the central bank or Federal Reserve and serve banks in their particular areas, the U.S. Treasury and the public.

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Reserve Banks act similarly to private banks, but do no operate for profit. Ownership of any stock is based on conditions of the Federal Reserve System. Stocks held by these banks cannot be sold or used as security for loans.

There are also about 3,000 member banks that belong to the Federal Reserve System. They hold a certain amount of capital as stock for the Reserve Banks in their district. Many commercial banks, savings banks, and savings and loan institutions must abide by Federal Reserve regulations.

The Fed has three advisory councils: the Federal Advisory Council, the Consumer Advisory Council, and the Thrift Institutions Advisory Council. Members represent the Reserve Bank districts. The Reserve Banks also have advisory committees.

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The Federal Reserve System consists of a board of governors, member banks and advisory councils. Created by the Federal Reserve Act in 1913, the Fed began operating in 1914 as a monitor of the public and private elements of the financial system.
Federal Reserve, structure
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2015-06-14
Sunday, 14 June 2015 04:06 PM
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