The Federal Reserve and Federal Reserve Banks

The Federal Reserve and Federal Reserve Banks

The Federal Reserve System is the central banking system of the United States of America and is also known as the Fed. The main tasks of the Federal Reserve are controlling the amount of currency made and destroyed on a daily basis, supervise and regulate banks, and maintain a strong payments system. It also implements monetary policy by open market operations, setting the discount rate and setting the reserve ratio.

The Federal Reserve involves economic education and research as well as community outreach. One of the biggest goals of the Federal Reserve is to minimize risk in the banking system.

President Bush recently nominated Ben Bernanke as the new Chairman of the Board of the Federal Reserve. Bernanke replaced Alan Greenspan when he retired after eighteen years as Chairman. The Chairman takes the lead role in directing Fed policy. The most important duties of the Federal Reserve authorities correspond to the maintenance of monetary and credit conditions in favor of business activity in fields such as agriculture, commercialism, and industry.

The Federal Reserve System was originally created to establish a new central bank designed to add strength and flexibility to the nation’s financial system. After the first Reserve Banks opened in 1914, Congress created Federal Reserve Notes to provide the nation with an elastic supply of currency. [1]The notes were issued to the Reserve Banks for subsequent transmittal to banking institutions in accordance with the needs of the public.

The Federal Reserve System is independent within the government; it has both private and public aspects. The System is independent of other branches and agencies of government and it is also self-financed. No one “owns” the Federal Reserve, however, Congress tends to watch over the system and occasionally looks over it activities and can modify its responsibilities. The Federal Reserve gets its authority from the U.S. Congress. It is considered to be an independent central bank because no one has to ratify its decisions. Congress intended for the System to be independent to keep politics out of monetary policy.

The Federal Reserve’s income mostly comes from the interest on the U.S. government securities it acquires through open market operations. Another source of income is the interest on foreign currency investments held by the System. The Federal Reserve turns the rest of its earnings over to the U.S. Treasury, after paying its expenses.

The structure of the Federal Reserve was constructed by Congress to allow it a wide outlook on the economy and the economy’s activities. The Federal Reserve is a federal system, which is made of a central, governmental agency, the Board of Governors, and twelve Federal Reserve Banks. The twelve banks are located in major cities throughout the United States. Altogether, these components are responsible for regulating and supervising some financial institutions and activities, for providing banks depository institutions and to the federal government, and for ensuring that consumers are treated fairly and informed in their business with the banking system.

The Federal Reserve Banks are known as the “Banker’s Banks”. There are twelve regional Federal Reserve Banks in the United States. They were established by congress as operating arms of the nation’s central banking system. The twelve Federal Reserve Districts are located in Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas, and San Francisco. The federal banks were established by Congress as the operating arms of the nation’s central banking system. The Reserve banks are not for profit. Its stock is not allowed to be traded, sold, or pledged as security for a loan.

A board of nine directors manages each reserve bank. The board of directors