It was founded by Congress in to provide the nation with a safer, more flexible, and more stable monetary and financial system. Over the years, its role in banking and the economy has expanded.
It acts as a fiscal agent for the U. There are several thousand member banks. The seven-member Board of Governors of the Federal Reserve System determines the reserve requirements of the member banks within statutory limits, reviews and determines the discount rates established by the 12 Federal Reserve banks, and reviews the budgets of the reserve banks.
The Chairman of the Board of Governors is appointed to a four-year term by the president of the United States. A Federal Reserve bank is a privately owned corporation established pursuant to the Federal Reserve Act to serve the public interest; it is governed by a board of nine directors, six of whom are elected by the member banks and three of whom are appointed by the Board of Governors of the Federal Reserve System.
Louis, Missouri; and San Francisco. The member Federal Open Market Committee, consisting of the seven members of the Board of Governors, the president of the Federal Reserve Bank of New Yorkand four members elected by the Federal Reserve banks, is responsible for setting Federal Reserve bank policy to encourage the long-term objectives of price stability i.
The Federal Advisory Council, whose role is purely advisory, consists of one representative from each of the 12 Federal Reserve districts. The Federal Reserve System exercises its regulatory powers in several ways, the most important of which may be classified as instruments of direct or indirect control.
One form of direct control can be exercised by adjusting the legal reserve ratio—i. Because loans give rise to new deposits, the potential money supply is, in this way, expanded or reduced. The money supply may also be influenced through manipulation of the discount ratewhich is the rate of interest charged by Federal Reserve banks on short-term secured loans to member banks.
Since these loans are typically sought by banks to maintain reserves at their required level, an increase in the cost of such loans has an effect similar to that of increasing the reserve requirement.
The classic method of indirect control is through open-market operationsfirst widely used in the s and now employed daily to make small adjustments in the market. Federal Reserve bank sales or purchases of securities on the open market tend to reduce or increase the size of commercial-bank reserves; e.
The three instruments of control described here have been conceded to be more effective in preventing inflation in times of high economic activity than in bringing about revival from a period of depression.
A supplemental control occasionally used by the Federal Reserve Board is that of changing the margin requirements involved in the purchase of securities. The Federal Reserve has broad supervisory and regulatory authority over state-chartered banks and bank holding companies, as well as foreign banks operating in the United States.
Through the CFPB, it is also involved in maintaining the credit rights of consumers. One of the longest chairmanships of the Federal Reserve Board was held by Alan Greenspanwho took office in August and held the post until January In Janet Yellen became the first woman to chair the board.
Learn More in these related Britannica articles:The Federal Reserve System, commonly known as the Fed, is the central bank of the United States, which regulates the U.S. monetary and financial system. The Federal Reserve System (also known as the Federal Reserve or simply the Fed) is the central banking system of the United States of regardbouddhiste.com was created on December 23, , with the enactment of the Federal Reserve Act, after a series of financial panics (particularly the panic of ) led to the desire for central control of the monetary system in order to alleviate financial crises.
the united states federal reserve system consists of how many regional banks? 12 an asset's _____ is the ease with which it can be converted quickly into the most widely accepted and easily spent form of money, cash, with little or no loss of purchasing power.
The Structure and Functions of the Federal Reserve System. The Federal Reserve System is the central bank of the United States.
It was founded by Congress in to provide the nation with a safer, more flexible, and more stable monetary and financial system.
The Federal Government of the United States Some make the case for expansive federal powers while others argue for a more limited role for the central government in relation to individuals, the states, or other recognized entities.
Separate from, but not entirely independent of, this federal court system are the court systems of each. The United States Constitution requires government spending be approved in bills passed by the United States Congress.
Some government functions such as the Federal Reserve System are completely self-funded. Others, like Social Security and Medicare, are partially self-funded but may be subject to administrative shutdowns and failures if the government fails to meet its financial obligations.