Federal Reserve Bank

12 Pages 3123 Words

Like most industrialized nations, the United States has a central bank to meet certain needs of its complex economy and financial system. Unlike most central banks, however, the United States' Federal Reserve System is, in a sense, a "decentralized" central bank. It consists of 12 regional Federal Reserve Banks and their branches operating under the Board of Governors of the Federal Reserve System in Washington, DC.
Established in December 1913 by the Federal Reserve Act, the Federal Reserve System was designed to rectify the conditions underlying the recurrent money panics that had plagued the country for many years. The act has been amended several times to further the Federal Reserve System's ability to foster a sound financial system and a healthy economy.
The Federal Reserve System advances this goal through several means. Its monetary policy decisions affect the flow of money and credit in the economy. It contributes to the safety and soundness of the national financial system by establishing regulations and acting as a commercial bank supervisor. And, by serving as a bank for depository institutions and the federal government, the Fed helps ensure that the system of paying for all kinds of business transactions works efficiently.
The Federal Reserve's Structure safeguard the Federal Reserve from short-term political pressures while ensuring its fundamental accountability, the System was set up to be "independent" within government. The System operates on its own earnings rather
Than on congressional appropriations, and the members of its Board of Governors are appointed for long, staggered terms, limiting the influence of day-to-day political considerations.
The Federal Reserve works within government, however, in the sense that it formulates monetary policy to achieve overall goals set by Congress and the President. Although the Federal Reserve's specific decisions do not have to be app...