Federal Reserve Bank

What is the Federal Reserve Bank?

The Federal Reserve acts as the central bank of the United States.  The "Fed" was instantiated by congress and was put in place to stabilize and formalize the banking system within the country.  The primary role of the federal reserve bank is to implement monetary policy to keep a balance between steady economic growth and high levels of inflation

How is the Federal Reserve Organized?

The federbal reserve is organized in tiers; there is a board of governors which oversees the entire federal reserve system.  Then, there are 12 district federal reserve banks, and each district has a group of 9 directors. 

The board of governors are appointed to office by the President of the United States, then confirmed by the Senate, and consists of 7 members who serve 14 year terms.  Ben Bernanke is currently the chairman of the board.  He took office in 2006 and took over for the former chairman Alan Greenspan.  The primary function of the board of governors is to manage the monetary policy of the financial system in the country.  This includes setting the bank reserve requirements, setting discount rate and federal funds policy, and monitoring open market operations.  The Board is also responsible for managing the 12 district member banks of the federal reserve system in a supervisory role, developing the nations payments system, and establishing federal laws around consumer credit.  

There are 12 district banks and they are located in Atlanta, Boston, Chicago, Cleveland, Dallas, Kansas City, Minneapolis, New York, Richmond, Philadelphia, San Francisco, and St. Louis.  Each bank is its own revenue cost center and generates interest income off of the policy decisions that are established by the board of governors.  It is important to note that the federal reserve banks are not in business for themselves, they return all profits back to the U.S. Treasury department.  The primary responsibility of these banks is to distribute government securities into the market; which in turn regulates the amount of money that is in circulation at any point in time.  Secondly, district banks are responsible for recommending changes in the discount rate to the board of governors. 

Finally, each of the bank distributes currency and coin to banking institutions during times of heavy demand, process checks for banks that are members of that federal reserve bank, provide a Fedwire for member banks to process wire transfers through, and finally act as a clearinghouse for recurring payments such as social security and payroll.

Tim Ord
Ord Oracle

Tim Ord is a technical analyst and expert in the theories of chart analysis using price, volume, and a host of proprietary indicators as a guide...

Day Trading Simulator

Tradingsim.com provides the ability to simulate day trading 24 hours a day from anywhere in the world. TradingSim provides tick by tick data for...

Send this article to a friend.

Enter multiple addresses on separate lines or separate them with commas.