In: Economics
Identify the goals and describe the structure of the Federal Reserve System.
Step 1- Goals
of the Federal Reserve System :
It is the central bank of the United States. Congress created it
for providing the nation with a safer, more flexible and more
stable monetary and financial system.
Conducting monetary policy is the main economic aim of the Federal
Reserve System.
Three key objectives were established by the U.S. Congress for
monetary policy in the Federal Reserve Act: maximum employment,
stable prices and long term moderate interest rates. Maximum
employment and stable prices are a dual mandate of the Federal
Reserve. Research is conducted in the economy and providing
numerous publications.
Step 2- Structure
of the Federal Reserve System :
It has a structure of two parts -
i). Central authority/ Board of Governors in Washington D.C.
ii). 12 Federal Reserve Banks are located throughout the country
which is called a Decentralized network.
FOMS (Federal Open Market Committee) sets the Monetary policy which
considers members of the Board of Governors and Reserve Bank's
presidents.
Board of Governors:
The Federal Reserve System is overseen by the board and the board
is an independent governmental agency. This has seven members on
the board and its staff include an independent government agency
that is charged with overseeing the Federal Reserve System.
President appoints these boards of members and the Senate confirms
it. The term of 14 years is served staggered that expires in every
even number year. The board of members is appointed in order to
shield them from the pressure of politics for the long term. A
chairman and vice-chairman of the board are designated by the
President and both of them serve for a term of four years. These
appointments are subjected to the approval of the Senate and might
be renewed.
Federal Reserve Banks:
These 12 banks carry out day to day operations of the system. The
Reserve Banks/district banks are non-governmental banks and their
setup is similar to the set up of private corporations but they are
operated in the interest of the public. Branches of Reserve Bank
are located in the other 24 cities.
The Reserve Banks and branches of Reserve Bank have a board of
directors that considers representatives of the commercial banks
and those are also the members of the Federal Reserve System and
individuals who appear for each District's interest of the
business. Labor, consumer, non-profit sectors might also be
included in the board. The board of directors appoints President of
each Bank and the Board of Governors approve it which protects
against the influence of politics.