- Government agency that regulates banks and sets monetary policy
- Formed in 1913 in response to huge number of bank failures
- help provide a safety net for banks and make financial transactions between banks easier
1. Board of Governors
- 7 members
- Runs the system, headed by a chairman
- chairman appointed by the President, approved by the Senate
- currently Janet Yellen
- prior Chairmen: Ben Bernanke, Paul Volcker, Alan Greenspan
- predict economic trends,
- oversee reserve system,
- serve on Federal Open Market Committee (FOMC)
2. FOMC (Federal Open Market Committee)- 12 members (7 governors, head of New York Fed, four other reserve heads that rotate in and out);
- make decisions about how to use monetary policy
3. Reserve Banks- 12 of them around the U.S.
A = Boston
B = New York City
C = Philadelphia
D = Cleveland
E = Richmond
F = Atlanta
G = Chicago
H = St. Louis
I = Minneapolis
J = Kansas City
K = Dallas
L = San Francisco
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- Provide financial services for banks (check cashing/transfer, holding extra money, etc.)
- Contribute to monetary policy (have economists that inform reserve heads about state of economy in the region)
- Supervise and regulate banks in area (oversee operations, make sure banks are financially sound)
- If banks have problems, Fed will give short term loans to the banks through the discount window.
- idea is to keep banks from collapsing
