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On December
23, 1913,
the Federal Reserve System,
which serves as the nation's central bank, was created by an
Act of Congress. The System consists of a seven member Board
of Governors with headquarters in Washington, D.C., and
twelve Reserve Banks located in major cities throughout the
United States.
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Appointments to the
Board
The seven members of the Board
of Governors are appointed by the President and
confirmed by the Senate to serve 14-year terms of office.
Members may serve only one full term, but a member who has
been appointed to complete an unexpired term may be
reappointed to a full term. The President designates, and
the Senate confirms, two members of the Board to be Chairman
and Vice Chairman, for four-year terms.
Representation
Only one member of the Board may be selected from any one of
the twelve Federal Reserve
Districts. In making appointments, the President is
directed by law to select a "fair representation of the
financial, agricultural, industrial, and commercial
interests and geographical divisions of the country."
These aspects of selection are intended to ensure
representation of regional interests and the interests of
various sectors of the public.
Responsibilities
The primary responsibility of the Board members is the
formulation of monetary policy. The seven Board members
constitute a majority of the 12-member Federal
Open Market Committee (FOMC), the group that makes the
key decisions affecting the cost and availability of money
and credit in the economy. The other five members of the
FOMC are Reserve Bank presidents, one of whom is the
president of the Federal Reserve Bank of New York. The other
Bank presidents serve one-year terms on a rotating basis. By
statute the FOMC determines its own organization, and by
tradition it elects the Chairman of the Board of Governors
as its Chairman and the President of the New York Bank as
its Vice Chairman.
The Board sets reserve requirements and shares the
responsibility with the Reserve Banks for discount rate
policy. These two functions plus open market operations
constitute the monetary policy
tools of the Federal Reserve System.
In addition to monetary policy responsibilities, the
Federal Reserve Board has regulatory
and supervisory responsibilities over banks
that are members of the System, bank holding companies,
international banking facilities in the United States, Edge
Act and agreement corporations, foreign activities of member
banks, and the U.S. activities of foreign-owned banks. The
Board also sets margin
requirements, which limit the use of credit for
purchasing or carrying securities.
In addition, the Board plays a key role in assuring the
smooth functioning and continued development of the nation's
vast payments system [see Fedwire
and Payment System Risk
Policy].
Another area of Board responsibility is the development
and administration of regulations that implement major
federal laws governing consumer credit such as the Truth in
Lending Act, the Equal Credit Opportunity Act, the Home
Mortgage Disclosure Act and the Truth in Savings Act
[see Consumer Information
and Community Affairs].
Meetings
The Board usually meets several times a week. Meetings
are conducted in compliance with the Government in the
Sunshine Act, and many meetings are open to the public. If
the Board has convened to consider confidential financial
information, however, the sessions are closed to public
observation.
Contacts within Government
As they carry out their duties, members of the Board
routinely confer with officials of other government
agencies, representatives of banking industry groups,
officials of the central banks of
other countries, members of Congress and academicians.
For example, they meet frequently with Treasury officials
and the Council of Economic Advisers to help evaluate the
economic climate and to discuss objectives for the nation's
economy. Governors also discuss the international monetary
system with central bankers of other countries and are in
close contact with the heads of the U.S. agencies that make
foreign loans and conduct foreign financial
transactions.
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