Federal Reserve System

The Federal Reserve System (also known as the Federal Reserve, and informally as the Fed) is the central banking system of the United States. It was created on December 23, 1913, with the enactment of the Federal Reserve Act, largely in response to a series of financial panics, particularly a severe panic in 1907. Over time, the roles and responsibilities of the Federal Reserve System have expanded and its structure has evolved. Events such as the Great Depression were major factors leading to changes in the system.

The Congress established three key objectives for monetary policy—maximum employment, stable prices, and moderate long-term interest rates—in the Federal Reserve Act. The first two objectives are sometimes referred to as the Federal Reserve's dual mandate. Its duties have expanded over the years, and today, according to official Federal Reserve documentation, include conducting the nation's monetary policy, supervising and regulating banking institutions, maintaining the stability of the financial system and providing financial services to depository institutions, the U.S. government, and foreign official institutions. The Fed also conducts research into the economy and releases numerous publications, such as the Beige Book.

The Federal Reserve System's structure is composed of the presidentially appointed Board of Governors (or Federal Reserve Board), the Federal Open Market Committee (FOMC), twelve regional Federal Reserve Banks located in major cities throughout the nation, numerous privately owned U.S. member banks and various advisory councils. The FOMC is the committee responsible for setting monetary policy and consists of all seven members of the Board of Governors and the twelve regional bank presidents, though only five bank presidents vote at any given time. The Federal Reserve System has both private and public components, and was designed to serve the interests of both the general public and private bankers. The result is a structure that is considered unique among central banks. It is also unusual in that an entity outside of the central bank, namely the United States Department of the Treasury, creates the currency used. According to the Board of Governors, the Federal Reserve System "is considered an independent central bank because its monetary policy decisions do not have to be approved by the President or anyone else in the executive or legislative branches of government, it does not receive funding appropriated by the Congress, and the terms of the members of the Board of Governors span multiple presidential and congressional terms." Its authority is derived from statutes enacted by the U.S. Congress and the System is subject to congressional oversight. The members of the Board of Governors, including its chairman and vice-chairman, are chosen by the President and confirmed by the Senate. The government also exercises some control over the Federal Reserve by appointing and setting the salaries of the system's highest-level employees. Nationally chartered commercial banks are required to hold stock in the Federal Reserve Bank of their region; this entitles them to elect some of the members of the board of the regional Federal Reserve Bank. Thus the Federal Reserve system has both public and private aspects. The U.S. Government receives all of the system's annual profits, after a statutory dividend of 6% on member banks' capital investment is paid, and an account surplus is maintained. In 2010, the Federal Reserve made a profit of $82 billion and transferred $79 billion to the U.S. Treasury. This was followed at the end of 2011 with a transfer of $77 billion in profits to the U.S. Treasury Department.

Read more about Federal Reserve System:  Purpose, Structure, Monetary Policy, Measurement of Economic Variables, Budget, Criticisms

Other articles related to "federal reserve system, federal reserve, federal, reserve":

Benjamin Strong, Jr. - Economic Policies and Advocacy
... Strong was also involved in the establishment of the Federal Reserve System ... did eventually serve as the model upon which the Federal Reserve System was created with, however, significant changes that placed control into political hands (via the Board of Governors, selected by the President ... drafts, and debates, a bill creating the Federal Reserve System was approved by Congress as the Federal Reserve Act and signed into law by President Wilson on December 23, 1913 ...
Federal Reserve System Open Market Account
... The Federal Reserve System Open Market Account (SOMA) is one of the monetary policy tools used by the Federal Reserve System ... It consists of the Federal Reserve's domestic and foreign portfolios ... The Federal Open Market Committee (FOMC) has designated the Federal Reserve Bank of New York to execute open market transactions on behalf of the entire ...
Federal Reserve System - Criticisms
... The Federal Reserve System has faced various criticisms since its inception in 1913 ... These criticisms include the assertions that the Federal Reserve System violates the United States Constitution and that it impedes economic prosperity ... Paul have taken the stance that the United States does not actually own the Federal Reserve, rather, the reserve is a privately owned bank that acts independently of the government and is therefore unchecked ...
Federal Reserve - Monetary Policy - Tools - Reserve Requirements
... policy adjustment employed by the Federal Reserve System is the fractional reserve requirement, also known as the required reserve ratio ... The required reserve ratio sets the balance that the Federal Reserve System requires a depository institution to hold in the Federal Reserve Banks, which depository institutions ... The required reserve ratio is set by the Board of Governors of the Federal Reserve System ...
Legal Tender Cases - How Legal Tender Is Issued in The U.S. Today
... of Engraving and Printing, under authority of the Federal Reserve System ... Treasury Department, whereas the Federal Reserve is not ... The Federal Reserve System can authorize as much paper money as it sees fit, but the U.S ...

Famous quotes containing the words system, federal and/or reserve:

    He could jazz up the map-reading class by having a full-size color photograph of Betty Grable in a bathing suit, with a co- ordinate grid system laid over it. The instructor could point to different parts of her and say, “Give me the co-ordinates.”... The Major could see every unit in the Army using his idea.... Hot dog!
    Norman Mailer (b. 1923)

    I am willing to pledge myself that if the time should ever come that the voluntary agencies of the country together with the local and state governments are unable to find resources with which to prevent hunger and suffering ... I will ask the aid of every resource of the Federal Government.... I have the faith in the American people that such a day will not come.
    Herbert Hoover (1874–1964)

    Common experience is the gold reserve which confers an exchange value on the currency which words are; without this reserve of shared experiences, all our pronouncements are cheques drawn on insufficient funds.
    René Daumal (1908–1944)