term paper - Ferencz 1 Amanda Ferencz ECO 2023 Prof...

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Ferencz 1 Amanda Ferencz ECO 2023 Prof. Gislason The Federal Reserve System The Federal Reserve System is an important feature in American economics. Known as the Fed, it was created on December 23 rd , 1913. The structure of the Fed consists of the Board of Governors, open banks, reserve banks and the Board of Directors. There are many functions within the Fed that include supervision and regulation, consumer and community affairs, and the implementation of monetary policy. The Fed uses three tools to help regulate monetary policy: buying and selling government securities, establish the legal reserve requirement, and to set the overnight lending rate. It is organized in this manner to prevent widespread bank panic, which lead to the Great Depression of the 1920’s. To avoid such a crisis in out economy, the Fed is organized in a particular manner. The Fed starts with the Board of Governors. The members of the Board of Governors are appointed by the President and confirmed by the Senate to serve 14-year terms of office (“The Structure of the Federal Reserve System”). All members may only serve a full term, however, if a member is appointed due to the death of a previous member, they may be reselected. The President chooses two members to become chairman and vice-chairman. Both of these members serve as chairmen for one four-year term. Once the members are appointed, the Federal Reserve Districts must appoint a representative from each of the twelve districts. The Board of Governors serve as the majority of a group called the Federal Open Market Committee (FOMC). The other five members are the Presidents of five of the Federal Reserve Districts. One of these five Presidents,
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Ferencz 2 however, will always be the President of the Federal Reserve of New York. The other four district presidents rotate their term on the board every year. The FOMC’s main concern is to regulate the monetary policy held in our economy. Before each meeting, a report is complied that represents the prospective and past economic conditions. These reports include the condition of each Federal Reserve Bank. Federal Reserve banks are operated under the general supervision of the Board of Governors in Washington D.C. (“The Structure of the Federal Reserve System”). Federal Reserve Banks generate their income in two ways. First, these banks receive interest on
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term paper - Ferencz 1 Amanda Ferencz ECO 2023 Prof...

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