Federal Reserve Bank Structure

Federal Reserve System History • Federal Reserve Bank Structure

The Board of Governors

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 Banks

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:

• Operating their portion of the nationwide payment system
• Distributing currency throughout the region
• Supervising regional member banks and bank holding companies
• Serving as bankers for the U.S. treasury
• Acting as a banker's bank — a depository institution for the regional banks (responsibilities include lending money to depository institutions through the discount window)

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.

Federal Reserve Bank Structure