Question

briefly review the structure of the federal reserve bank. why are The terms of the board of governors set up the way they are? Our members of the feds susceptible to political pressures? In the context of balance sheets how does a check from bank a get cleared when it is cash to buy a customer of Bank b?

Answer 1

The Federal Reserve System has two parts :

a. Board of Governors as the central authority in Washington D.C

b. Decentralized network of 12 Federal banks that are located throughout the country .

The Board of Governors or the Federal Reserve Board is the national component of the Federal reserve system. The board consists of seven governors who are appointed by the president and confirmed by the senate .

Next comes the network of 12 Federal reserve banks and its 24 branches located all across the country. They are the operating arms of the central bank.

Almost 38% of the commercial banks in US are the members of the Federal Reserve System. Apart from that there are around 17000 other depository institutes that provide check deposits and other banking services.

Each Reserve bank has advisory committees as well.

Each member of the Board of Governor is appointed to serve for 14 years and the appointment is staggered which means that every two years one Governor's terms expires. The reason for staggered terms of appointment is to provide Federal Reserve System political independence as a central bank as this ensures that no president can take advantage of his power to appoint Governors and stack the Board with governors who will favor his policies.

Federal Reserve System are not a part of the federal government though they exist because of an act of Congress. As mentioned above , the Board of Governors enjoy political independence and hence are not susceptible to political pressures.