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The founders of the system believed it was necessary

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Unformatted text preview: ry institutions since they change the ratio of non–earning assets (reserves) to deposits in these institutions. MONETARY POLICY The United States is unique in having a central bank that is federal rather than unitary in structure. Established in 1913, the Federal Reserve System consists of the Board of Governors in Washington, D.C., and twelve regional Federal Reserve Banks which are the operating arms of the System. The Federal Reserve Bank of San Francisco represents the Twelfth District. Although primary responsibility for monetary policy rests with the Board, the Reserve Banks also have a role to play. The Board of Governors consists of seven officials who are appointed to fourteen–year terms by the President of the United States and confirmed by the Senate. The Chairman of the Board is appointed by the President and serves for tour years, but may be reappointed. The System meets its operating expenses primarily from the interest earnings from its portfolio of securities and thus is not subject to the Congressional appropriations process. The founders of the System believed it was necessary to separate the people who frame the government's spending decisions and the people who control the supply of money, and devised the Institutional structure with this view in mind. Although the Federal Reserve is ultimately responsible to Congress, it is an independent agency within the federal government. The Chairman and other Governors report regularly to the Congress and meet also with senior administration officials in order to coordinate monetary policy with the government's overall economic program. Each Reserve Bank is headed by a President who is appointed by the Bank's Board of Directors, subject to final approval by the Board of Governors in Washington. The Directors are chosen to provide a representative cross section of interests in their communities. Their varied backgrounds and wide experience provide the System with a “grass–roots” informational network that helps to ensure that policy reflects...
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This note was uploaded on 12/30/2010 for the course SOC 101 taught by Professor Zhung during the Spring '10 term at Punjab Engineering College.

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