3 key.pdf - Purpose The Three Key System Entities The Board...

This preview shows page 1 - 4 out of 12 pages.

Purpose The Board of Governors, the Federal Reserve Banks, and the Federal Open Market Committee work together to promote the health of the U.S. economy and the stability of the U.S. financial system. The Three Key System Entities 2 The Federal Reserve Board: Selection and Function . . . . . . . . . . . . . . . . 10 The Federal Reserve Banks: Structure and Function . . . . . . . . . . . . . . . . 12 The Federal Open Market Committee: Selection and Function . . . . . 15 Other Significant Entities Contributing to Federal Reserve Functions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
The Federal Reserve System Purposes & Functions 9 hree key Federal Reserve entities—the Federal Reserve Board of Gov- ernors (Board of Governors), the Federal Reserve Banks (Reserve Banks), and the Federal Open Market Committee (FOMC)—make decisions that help promote the health of the U.S. economy and the stability of the U.S. financial system. Figure 2.1. How the Federal Reserve operates within the U.S. government framework A statutory framework established by the U.S. Congress guides the operation of the Federal Reserve System. FEDERAL OPEN MARKET COMMITTEE Seven Board members and five Reserve Bank presidents direct open market operations that sets U.S. monetary policy to promote maximum employment, stable prices, and moderate long-term interest rates in the U.S. economy. THE FEDERAL RESERVE ACT creates the Federal Reserve System and specifies how Board members and Reserve Bank presidents are chosen. PRESIDENT nominates members of the Board of Governors , the chief governing body of the Federal Reserve System, and nominates one Board member to be Chair and one to be Vice Chair. BOARD OF GOVERNORS Seven Board members guide all aspects of the operation of the Federal Reserve System and its five key functions. SENATE confirms Board members appointed by the President to staggered 14-year terms, and confirms the nominations of Board members to be either Chair or Vice Chair. FEDERAL RESERVE BANKS 12 Reserve Banks examine and supervise financial institutions, act as lenders of last resort, and provide U.S. payment system services, among other things. T
10 The Three Key System Entities The Federal Reserve Board: Selection and Function The Board of Governors—located in Washington, D.C.—is the govern- ing body of the Federal Reserve System. It is run by seven members, or “governors,” who are nominated by the President of the United States and confirmed in their positions by the U.S. Senate. The Board of Gov- ernors guides the operation of the Federal Reserve System to promote the goals and fulfill the responsibilities given to the Federal Reserve by the Federal Reserve Act. All of the members of the Board serve on the FOMC, which is the body within the Federal Reserve that sets monetary policy (see “ The Federal Open Market Committee: Selection and Function ” on page 15). Each member of the Board of Governors is appointed for a 14-year term; the terms are staggered so that one term expires on January 31 of each even-numbered year. After serving a full 14-year term, a Board member may not be reappointed. If a Board member leaves the Board before

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture