Tags: Money | Federal Reserve System

What Does the Federal Reserve System Do?

By    |   Saturday, 20 June 2015 11:51 PM

The Federal Reserve System acts as the primary bank of the United States and is responsible for monitoring the nation's money supply, controlling its interest rates and providing oversight for its banking system, according to Business Insider.

It is a four-tiered system starting with the Board of Governors, the Federal Open Market Committee, 12 Federal Reserve Banks located in geographic regions throughout the country and some smaller banks, Business Insider noted.

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The seven members of the Board of Governors are nominated by the president, while the Federal Open Market Committee includes the seven board members as well as five voting members from the ranks of presidents of the 12 Reserve Banks.

The Federal Reserve acts as a regulator of the nation's financial system, setting the nation's monetary policy, including the discount rate, as well as reserve requirements for its banks. It also uses open market operations — buying government bonds on the open market — to make adjustments to federal funds rates.

Its mandate is to "promote sustainable growth, high levels of employment, stability of prices to help preserve the purchasing power of the dollar and moderate long-term interest rates," according to the Federal Reserve website.

The Federal Reserve System, which acts as the central bank, was created by Congress on Dec. 23, 1913 to help the country have a stable and safe monetary system, according to FederalReserve.gov.

The Fed is led by a Board of Governors who are appointed by the president and serve 14-year terms. They must be confirmed by the Senate.

According to Investopedia, the Fed is independent
, but also subject to Congressional oversight, meaning its decisions don't have to be approved by the federal government, but lawmakers may occasionally take a look at the Federal Reserve's activities.

It has, according to Investopedia, "more power and influence on financial markets than any legislative entity."

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The Federal Reserve System acts as the primary bank of the United States and is responsible for monitoring the nation's money supply, controlling its interest rates and providing oversight for its banking system, according to Business Insider.
Federal Reserve System
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2015-51-20
Saturday, 20 June 2015 11:51 PM
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