Money is the anthem of success. It is the tangible spirit of the American Dream that has heartily inspired the masses, the framework for the pursuit of happiness, and no one regulates it more than the United States’ government. The Federal Reserve is the central bank for the United States and serves to handle the nation’s monetary policies in conjunction with the government’s fiscal policies in order to improve the economy.
Even in America’s sapling years there was a need for a centralized bank to rein in the nation’s economic interests. Internationally, a central bank would solidify the United States as a world economy by instilling confidence to foreign economies that would be more comfortable dealing with an orderly national bank than fickle individuals. Nationally, it would facilitate financial transactions between consumers and producers and address the needs for currency and its stability (“In Plain English” 2). “Another important issue was creating a balance between the private interests of banks and the centralized responsibility of government. What emerged—the Federal Reserve System—was a central bank under public control, with many checks and balances” (“In Plain English” 2).
Purpose, Duties, and Features
The Federal Reserve—or the Fed, as it has been kindly dubbed— serves as the central bank for the United States. It manages the monetary aspects of the nation and, in essence, attempts to nurture the economy by regulating the currency and credit within the country (Johnson 1). Through this regulation, the Fed seeks to create jobs, secure prices, and stabilize interest rates (“The Federal Reserve System” 8). Another of the Federal Reserve’s general responsibilities includes lending funds to private banks, the U.S. government, and foreign governments at no profit, as well as handling the United States’ payment system. However, not all of its funds are lent, some are withheld in the form of cash reserves and allow the Reserve to distribute and control the supply of currency (“The Federal Reserve System” 8; Meek, Morton, and Schug 474-75). Furthermore, the Federal Reserve serves to maintain the stability of the country’s monetary system by monitoring financial institutions and minimizing the risk of bank fraud. This, in turn, keeps all financial systems in the U.S. in sync and efficient (Meek, Morton, and Schug 475).
Although housed within the government, it is an independent organization that serves both public and private interests. This is because the Fed is monitored by Congress and, therefore, must abide by its regulations. However, it remains an autonomous institution unaffected by political favor or other outside influences (“In Plain English” 2).
The Federal Reserve, despite seeming like a single entity, is actually a combination of national and regional banks supervised by a Board of Governors located in Washington, D.C. The Board is a team of seven members appointed to 14-year terms each by the President of the...