The Federal Reserve

The Federal Reserve System, often referred to as the Federal Reserve or simply "the Fed," is the central bank of the United Statesan independent organization created by Congress to keep our money valuable and our financial system healthy.Congress created the Federal Reserve System in December 23,1913,with the signing of the Federal Reserve Act by President Woodrow Wilson,to serve as the central bank of the United States and to provide the nation with a safer, more flexible and more stable monetary and financial system. Over the years, its role has evolved and expanded.Today, the Fed's three functions are to provide and maintain an effective and efficient payments system, to supervise and regulate banking operations, and to conduct the nation's monetary policy.All three of these roles are important in maintaining a stable economy and a monetary policy.In its role as the central bank of the United States, the Fed serves as a banker's bank and as the government's bank. As the banker's bank, it helps to assure the safety and efficiency of the payments system. As the government's bank, or fiscal agent, the Fed processes a variety of financial transactions involving trillions of dollars.

The Federal Reserve's responsibilities fall into four general areas:

- conducting the nation's monetary policy by influencing money and credit conditions in the economy in pursuit of full employment and stable prices

- supervising and regulating banking institutions to ensure the safety and soundness of the nation's banking and financial system and to protect the credit rights of consumers

- maintaining the stability of the financial system and containing systemic risk that may arise in financial markets

- providing certain financial services to the U.S. government, to the public, to financial institutions, and to foreign official institutions, including playing a major role in operating the nation's payments systems

The Federal Reserve System has a structure designed by Congress to give it a broad perspective on the economy and on economic activity in all parts of the nation. It is a federal system, composed basically of a central, governmental agency-the Board of Governors-in Washington, D.C., and twelve regionalFederal Reserve Banks, located in major cities throughout the nation. These components share responsibility for supervising and regulating certain financial institutions and activities; for providing banking services to depository institutions and to the federal government; and for ensuring that consumers receive adequate information and fair treatment in their business with the banking system.

In the map below we can see the geographical distribution of the 12 banks in U.S. Some people think that these 12 banks are unusefull and their geographical distribution reflects the country’s political make-up in 1913, so in 2009 , Federal Reserve Banks do not

Figure 1 - Federal Reserve Banks in U.S.

The Federal Reserve System comprises:

- the presidentially appointed Board of Governorsof the Federal Reserve SysteminWashington, D.C.;

- the Federal Open Market Committee;

- twelve regional privately-owned Federal Reserve Banks located in major cities throughout the nation acting as fiscal agents for the U.S. Treasury, each with its own nine-member board of directors;

- numerous other private U.S. member banks, which subscribe to required amounts of non-transferable stock in their regional Federal Reserve Banks;

- various advisory councils.

The seven members of the Board of Governors of the Federal Reserve Systemare nominated by the President and confirmed by the Senate. A full term is fourteen years. Currently, board members are : Ben S. Bernanke, Chairman , Donald L. Kohn, Vice Chairman, Kevin M. Warsh , Elizabeth A. Duke , Daniel K. Tarullo.The Chairman and the Vice Chairman of the Board are named by the President from among the members and are confirmed by the Senate. They serve a term of four years. A member's term on the Board is not affected by his or her status as Chairman or Vice Chairman.