Federal Reserve In A Nut Shell.

3429 words - 14 pages

Congress created a reserve system called the Federal Reserve System under their powers of government this is called an act of congress. The seven member Board of Governors united headquarters is in Washington D.C. There are twelve banks located in key cities all over the United States.The Federal Reserve System is made up of several areas of government. The Board of Governors, Federal open market committee, Federal Reserve banks, Board of Directors, all make up the sometimes smoothly run system.The Board of GovernorsAppointments to the BoardThe seven members of the Board of Governors of the Federal Reserve System are nominated by the President and confirmed by the Senate. A full term is fourteen years. One term begins every two years, on February 1 of even-numbered years. A member who serves a full term may not be reappointed. A member who completes an unexpired portion of a term may be reappointed. All terms end on their statutory date regardless of the date on which the member is sworn into office.The Chairman and the Vice Chairman of the Board are named by the President from among the members and are confirmed by the Senate. They serve a term of four years. A member's term on the Board is not affected by his or her status as Chairman or Vice Chairman. The Current Members include Alan Greenspan Chairman, Roger Ferguson Jr., Vice Chairman, Edward Gramlich, Susan Schmidt Bies, Mark W. Olson, Ben S Bernanke, Donald L Kohn.RepresentationOnly one member of the Board may be selected from any one of the twelve Federal Reserve Districts. The twelve cites Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas, and San Francisco where the districts are located. In making appointments, the President is directed by law to select a "fair representation of the financial, agricultural, industrial, and commercial interests and geographical divisions of the country." These aspects of selection are intended to ensure representation of regional interests and the interests of various sectors of the public.ResponsibilitiesThe primary responsibility of the Board members is the formulation of monetary policy. The seven Board members constitute a majority of the 12-member Federal Open Market Committee (FOMC), the group that makes the key decisions affecting the cost and availability of money and credit in the economy. The other five members of the FOMC are Reserve Bank presidents, one of whom is the president of the Federal Reserve Bank of New York. The other Bank presidents serve one-year terms on a rotating basis. By statute the FOMC determines its own organization, and by tradition it elects the Chairman of the Board of Governors as its Chairman and the President of the New York Bank as its Vice Chairman.The Board sets reserve requirements and shares the responsibility with the Reserve Banks for discount rate policy. These two functions plus open market operations constitute the monetary policy tools of...

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