Data Bases • Custom Term Papers • Free Term Papers • Free Research Papers • Free Essays • Free Book Reports • Plagiarism? Links • Top 100 Term Paper Sites • Top 25 Essay Sites • Top 50 Essay Sites • Search 97,000 Papers @ DirectEssays.com • Search 101,000 Papers @ ExampleEssays.com • Search 90,000 Papers @ MegaEssays.com Free Essays • Term Paper Sites • Chuck III's Free Essays • Free College Essays • TermPaperSites.com • My Term Papers • Get Free Essays • Essay World • Planet Papers	Search Lots of Essays Back to Subjects - Political Science fed fed By: THE FEDERAL RESERVE BOARD The Federal Reserve System was founded by Congress in 1913 to be the central bank of the United States. The Federal Reserve System was founded to be a safer, more flexible, and more stable monetary financial system. Over the years, the role of the Federal Reserve Board and its influence on banking and the economy has increased. Today, the Federal Reserve System’s duties fall into four general categories. Firstly, the FED conducts the nation’s monetary policy. The FED controls the monetary policy by influencing credit conditions in the economy. The FED measures its success in accomplishing these goals by judging whether or not the economy is at full employment and whether or not prices are stable. Not only does the FED control monetary policy by influencing credit conditions in the economy, it also supervises and regulates banking institutions to ensure the safety and soundness of the nation’s banking and financial system. The FED protects the credit rights of consumers. Thirdly, the FED maintains the stability of the financial system by controlling the risk that may arise in financial markets. Fourthly, it is also the Federal Reserve System’s responsibility to provide 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 system. Before Congress created the Federal Reserve System, periodic financial panics had plagued the nation. These panics had contributed to many bank failures, business bankruptcies, and general economic downturns. A particularly severe crisis in 1907 prompted Congress to establish the National Monetary Commission, which put forth proposals to create an institution that would counter financial disruptions of these kinds. After a great deal of debate and discussion, Congress passed the Federal Reserve Act, which President Woodrow Wilson signed into law on December 23, 1913. The act stated that its purposes were “to provide for the establishment of Federal reserve banks, to furnish an elastic currency, to afford means of rediscounting commercial paper, to establish a more effective supervision of banking in the United States, and for other purposes.” After the implementation of the Federal Reserve, several laws were passed to supplement it. Some of the key laws affecting the Federal Reserve Act are the Banking act of 1935; the Employment Act of 1946; the 1970 amendments to the Bank Holding Company Act; the International Banking Act of 1978; the Full Employment and Balanced Growth Act of 1978; the Depository Institutions Deregulation and Monetary Control Act of 1980; the Financial Institutions Reform, Recovery, and Enforcement Act of 1989; and the Federal Deposit Insurance Corporation Improvement Act of 1991. In two of the above-named acts, Congress defined the main goals of national economic policy. These acts are the Employment Act of 1946 and the Full Employment and Balanced Growth Act of 1978. The main goals of the Federal Reserve are economic growth, a high level of employment, stable prices, and moderate long-term interest rates. The Federal Reserve System is considered to be an independent central bank. It is an independent central bank only in the sense that its decisions do not have to be passed by the President or anyone else in the executive branch of the government. The entire Federal Reserve System is subject to oversight by the U.S. Congress because the Constitution gives Congress the power to coin money and set its value. This power to coin money given to Congress by the Constitution was then passed on to the Federal Reserve in 1913. Since the Federal Reserve must work within the confines of the overall goals of economic and financial policy established by the government, the description of the Federal Reserve System as “independent within the government” is a better description, as opposed to just independent. The Federal Reserve System has a structure designed by Congress to give it a broad view on the economy and on economic activity in all parts of the nation. The FED is a system composed of a central, governmental agency - the Board of Governors in Washington, D.C., and twelve regional Federal Reserve Banks, located in major cities throughout the nation. The above components of the Federal Reserve System share the responsibility of 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 proper information and equal treatment in their day to day affairs with the banking system. One of the major components of the Federal Reserve System is the Federal Open Market Committee (FOMC), which is made up of the Board of Governors, the president of the Federal Reserve Bank of New York, and presidents of four other Federal Reserve Banks, who serve on a rotating basis. The FOMC oversees open market operations, which is the main tool used by the Federal Reserve to influence money market conditions and the growth of money and credit. Not only is the FOMC a major component of the Federal Reserve System, two other groups take active roles in the way the Federal Reserve System works. These two groups are depository institutions, through which the tools of monetary policy operate, and advisory committees, which make recommendations to the Board of Governors and to the Reserve Banks regarding the System’s responsibilities. The Board of Governors of the Federal Reserve System was established as a federal government agency. It is made up of seven members appointed by the President of the United States and confirmed by the U.S. Senate. The full term of a Board member is fourteen years; the appointments are staggered so that one term expires on January 31 of each even-numbered year. After serving a full term, a Board member may not be reappointed. If a member leaves the Board before his or her term expires, the person appointed and confirmed to serve the remainder of the term may later be reappointed to a full term. The chairman and the vice chairman of the Board of Governors are also appointed by the President and confirmed by the Senate. The nominees to these posts must already be members of the Board or must be simultaneously appointed to the Board. The terms for these positions are four years. The Board of Governors is supported by a Washington staff numbering about 1,700. The Board’s responsibilities require thorough analysis of domestic and international financial and economic developments. The Board carries out those responsibilities in conjunction with other components of the Federal Reserve System. It also supervises and regulates the operations of the Federal Reserve Banks and their Branches and the activities of the various banking organizations, exercises broad responsibility in the nation’s payments system, and administers most of the nation’s laws regarding consumer credit protection. The Federal Reserve System conducts monetary policy using three major tools: Firstly, the FED uses Open market operations, which is the buying and selling of U.S. government securities in the open market to influence the level of reserves in the depository system. Secondly, the FED uses reserve requirements regarding the amount of funds that commercial banks and other depository institutions must hold in reserve against deposits. The discount rate is the third tool of the Federal Reserve Board and it is the rate charged to commercial banks and other depository institutions when they borrow reserves from a regional Federal Reserve Bank. Monetary policy regarding open market operations is established by the FOMC. Policy regarding reserve requirements and the discount rate is determined by the Federal Reserve Bank. Another role in which the Federal Reserve plays a major part is in the supervision and regulation of the U.S. banking system. The examination of institutions for safety and solidity - banking supervision - is shared with the Office of the Comptroller of the Currency, which supervises national banks, and the Federal Deposit Insurance Corporation, which supervises state banks that are not members of the Federal Reserve System. The implementation of the Federal Reserve in 1913 was truly a great assett to financial and American well being. Without the Federal Reserve, we would have no agency to control monetary policy and push the economy towards full employement. Bibliography: Word Count: 1361
Copyright © 2005 College Term Papers, INC All Rights Reserved.