The Federal Reserve System (the Fed) as the United States of America's central bank

The Federal Reserve System (Federal Reserve System)


The Federal Reserve System (the Fed) is the United States of America's central bank. Congress established it in 1913 to give the country's financial and monetary system more flexibility, protection, and stability. Nonetheless, its economic and banking responsibilities have grown over time. It is made up of 12 Reserve Banks, each with nine board members and a board of governors and member banks (federalreserve.gov). The Fed's primary goal is to support the US economy's sustainable operation and the public interest.

Governors' Council


The Board of Governors is composed of a team of seven members that is selected by the President of the United States. The congress thereafter confirms their appointment. They have overlapping 14-years terms to warrant continuity and steadiness over time. The head and the vice-chairperson are appointed to serve for four years and can be re-appointed depending on terms of service. The Board of Governors is situated in Washington, D.C. Also, the President appoints the seven-member team although subject to confirmation by the Senate (federalreserve.gov).The board plays a significant role in the system as they guide the monetary policy action and analyze transnational and domestic fiscal and economic conditions. They as well lead committees studying current issues such as consumer banking while they oversee all of the operations of the 12 Reserve Banks. Of note is that the board has the responsibility of taking part in the Federal Open Market Committee (FOMC) that performs the fiscal policy of the nation.

Federal Reserve Districts


The Federal Reserve System consists of 12 districts broken up by regions. They are responsible for holding reserve deposits and setting discount rates for commercial banks within their regions. They are as well considered as the Central Bank's operational arms. For each of the 12 districts, they have nine board of director members who oversees the management as well as the activities of the bank. Each Reserve Bank is separately incorporated to serve its region of the country. The Federal Reserve Banks serves the Treasury, banks and, secondarily, the public. Among other functions, they store currency and handles checks alongside the electronic disbursements. Being the bank for the U.S government, the Reserve Banks sell government securities, handles various payments of The Treasury, and administrates various investment undertakings.

Member Banks


There is about 38 percent of the 8,039 moneymaking banks established in the U.S, which are members of the Federal Reserve System. As for the national banks, they are mandated to be affiliates of The Fed whereas the state chartered banks may seek membership if they satisfy predefined set of requirements. The Member banks are stakeholders of their regional Federal Reserve and are therefore obligated to have 3 percent stake of their assets as stock in their reserve. This is a combination of the stock and surplus (Ebert, & Griffin, 2016). Nonetheless, the member banks cannot trade the stocks they own and do not control The Federal Reserve Bank by virtue of their stock ownership. From the proceeds of the Regional Bank, the member banks receive dividends amounting to 6% of the purchased stock while the remainder of The Federal Reserve district's profits is handed over to the Treasury Department.

References


Ebert, R. J., & Griffin, R. W. (2017). Business Essentials, 11th Edition. Bonton: Pearson Education Limited.


Federal Reserve.Gov (n.d.). Retrieved May 04, 2017, from https://www.federalreserve.gov/aboutthefed/structure-federal-reserve-system.htm


Federal Reserve Banks. (n.d.). Retrieved May 04, 2017, from https://www.richmondfed.org/faqs/frb

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