Federal Reserve System Essay

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Explain in detail the organization of the Federal Reserve System. Answer: Congress created the Federal Reserve System in 1913 as the central bank and monetary authority of the United States. Unlike other countries where they have one central bank, we created a system of 12 Federal Reserve Districts. These new banks were named for the cities they are in; Federal Reserve Banks of Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas and San Francisco (pg 204). The Federal Reserve Act created a hybrid centralized/decentralized system. All national banks joined the Federal Reserve System and were then bound by the Fed’s new regulations. Most state banks did not join the system. The Federal Reserve makes sure there is enough money and credit in the banking system to support a growing economy. Federal Reserve banks took over the power to issue bank notes, and were granted the poser to buy and sell government securities, loan money to member banks, and to clear checks between banks. The Fed also also requires that member banks hold cash in reserve at a specified rate, currently 10% of their deposits (pg 205). The Fed’s customers are member banks, much in the same manner that depository institutions service the general public. The Fed also exercises powers to influence the…show more content…
The Board of Governors consists of 7 members who serve 14 year terms that can be renewed. The president appoints members to the board, and they are confirmed by the Senate. Their terms are staggered so that 1 new member is appointed every 2 years, limiting political influence. This board is responsible for setting and implementing our country’s monetary policy. The board also oversees the 12 Federal Reserve Banks which serves to bring some centralization to the system. The chairman of the board is appointed and serves a renewable 4 year term (pg
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