Federal Reserve System (FED)

The Federal Reserve System (FED) is the central banking system of the United States. It was established on December 23, 1913 upon the enactment of the Federal Reserve Act. Currently, Ben S. Bernanke is the Chairman of the Federal Reserve Board.

FED responsibilities are as follows:

  • set the monetary policy of the USA, in order to maintain stable prices, maximum employment and moderate long-term interest rates;
  • supervise and regulate financial institutions to protect the credit rights of consumers, ensure a stable financial system and contain systemic risk that may arise in financial markets;
  • Operate and oversee the USA’s payment system, by the provision of certain financial services to the U.S. government, U.S. financial institutions, and to foreign official institutions.

The Federal Reserve System's structure:

  • Federal Reserve Board that is appointed by the President;
  • 12 regional Federal Reserve Banks; and
  • Federal Open Market Committee (FOMC) is responsible for setting the monetary policy and consists of the members of Federal Reserve Board and the 12 presidents of the aforementioned regional Federal Reserve Banks.

Federal Reserve is independent within the government in that "its monetary policy decisions do not have to be approved by the President or anyone else in the executive or legislative branches of government." Its authority is derived from statutes enacted by the U.S. Congress and the System is subject to congressional oversight.