Question

Describe the groups that make up the Federal Reserve created under the Federal Reserve Act of 1914 (board of governors, district banks, federal open market committee (FOMC)).

Answer 1

Board of Governors is a seven member committee appointed by POTUS and confirmed by senate for 14 year period. They are charged with formulation of Monetary policy of USA. this includes roles like oversight of reserve ratios and application of internationally mandated credit or reserve related requirements like BASEL norms. They are appointed in accordance of industrial, agricultural and financial interest of the nation. They can also issue recommendations for regional Federal Reserve banks.

FOMC is a 12 member committee which is responsible for Open Market operations and other unconventional interventions. OMO is responsible for changing the liquidity in member Federal Reserve banks and other banks by using the GSec or blue chip stocks. In perilious conditions they can issue directives for direct involvement in financial markets by buying and selling of securities of companies or foreign securities. They also supervise foreign investments. It consists of all members of Board of Governors and 5 members from regional feds. All these members are selected for 2-3 year tenure. BoG President is the Chairman of FOMC. NewYork fed President is the Vice Chairman.

Regional federal Reserve banks: There are 12 RFEDs which act as the implementation arm of the FED.They all have jurisdiction over different parts of the US territory, Like NewYork Fed, which oversees NY, NJ, CT, Puerto Rico etc.  They are managed by a 9 member Board of Director headed by a President. 6 of these members are non bankers and 3 are from banking sector. They help in management and monetary implementation of entire banking system within its jurisdiction. They also print banknotes.