The Federal Reserve System was created on December 23, 1913 by the Federal Reserve Act, the Federal Reserve Notes were also created to have a flexible money supply, and all national banks had to join.
It is often called the Federal Reserve, or Fed, and is the central banking system of the United States, commonly referred to as U.S. Federal Reserve. It consists of the Board of Governors, twelve regional Federal Reserve Banks and a variety of member banks and other institutions.
The Emergency Banking Act was adopted by Congress and served as the official banking act from the 9th of March 1933. It stipulated the role and authority granted to Federal Reserve Banks, and the amount of loans granted to member banks.
And as demanded by the Executive Board, the key responsibilities of the Federal Reserve is to monitor banks. The Fed system is composed of five key components which include the Board of Governors, Federal Open Market Committee, Federal Reserve Banks and Member Banks Board of Governors.
The banks earn their financial capital from their private member banks. Each Federal Reserve Bank and every member bank of the Federal Reserve System are subject to regulatory oversight of the Board of Governors.
The seven members of the Board of Governors are appointed by the president and confirmed by the United States Senate. Members are selected for a term of fourteen years without the possibility of re-selection. A governor can use the remaining years of another governor in addition to own mandate.
The task of the Boards is to implement the decisions, which the Federal Open Market Committee (FOMC) determined. Apart from its economic powers, the Council also appoints three directors of the twelve Federal Reserve Banks. The remaining six directors of each Federal Reserve Bank are appointed by the member banks.
Some of the key responsibilities of the Federal Reserve System include: serving as the central bank for the United States, supervision and regulating financial institutions. Manage the country’s money supply via monetary policy, preserve the stability of the financial system, support the exchange of payments among regions. And bolster United States’ position in the global economy
Criticism leveled at the Federal Reserve involves the discretion with which decisions are made. Meetings are held in camera and documents reveal a five-year delay. Critics argue that discretionary policies cause more volatility in the market because the market must speculate.