Federal Reserve Bank Structure
Federal Reserve System History • Federal Reserve Bank StructureThe Federal Reserve System was set out by Congress in 1913 in the Federal Reserve Act. It includes the Board of Governors, 12 regional banks, and the Federal Open Market Committee.
The Board of GovernorsThe Board of Governors, located in Washington, D.C., is the "government agency" part of the Federal Reserve System; it is the Chairman of the Board of Governors who reports to Congress, and the Board of Governors that sets out the regulations for the entire Federal Reserve System per its Congressional mandate.
There are seven members of the Board — themselves called governors — who are all appointed by the President of the United States and confirmed by the U.S. Senate. Each governor's term is limited to 14 years, and the terms of each governor are staggered so that one governor's term expires every other year. The Chairman and Vice Chairman of the Board — required to have been Board members themselves — each serve four-year terms.
Of the three monetary policy tools at the Fed's disposal (including open market operations, the discount rate, and reserve requirements), the Board of Governors has sole control over reserve requirements and joint control over the discount rate (with the regional banks), but it does not control open market operations.
The Regional BanksThere are twelve regional banks within the Federal Reserve System. Each Bank is assigned a number and a letter — look on any U.S. currency and you'll see a number and a letter corresponding to the Federal Reserve Bank that distributed that piece of currency.
To aid the regional banks in their supervisory and financial service responsibilities, many banks have branches throughout their districts. The following table lists the 12 regional Federal Reserve Banks and their branches.
Each Bank is run by a bank President and nine directors, chosen from outside the Bank. Three of those directors represent member banks and the rest are from the public, designed to represent a diverse selection of the region's population.
The functions of the 12 regional banks include:
The Federal Open Market Committee
The third part of the Federal Reserve System is the Open Market Committee, which is charged with buying and selling securities on the open market in order to change the supply of money held in deposit at the Federal Reserve Banks.
The FOMC is made up of all seven governors from the Board of Governors, the President of the Federal Reserve Bank of New York, and four presidents of other regional banks. The four positions for regional Bank presidents rotate each year.
The FOMC meets eight times a year to discuss current economic conditions in the United States. At that meeting, the FOMC sets a target federal funds rate — a rate it perceives will affect the supply of and demand for money so as to stimulate the economy in the desired direction. After the federal funds target rate is set, securities are accordingly bought and sold on the open market by the Federal Reserve Bank of New York.
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Federal Reserve Bank Structure