How Does the Federal Reserve Bank Function?
- Ben Bernanke, Federal Reserve Chairman
The Federal Reserve, or the "Fed," is the central bank of the United States and is responsible for ensuring the stability of the nation's financial systems. The bank is part of a system that was created and instituted in 1913 by President Woodrow Wilson as part of the Federal Reserve Act. There are 12 separate regional banks in the system, and though it is owned by the member banks who comprise it, the Fed does not operate to make profits. Thus, the Fed is independent from other government institutions, functioning with private assets. The current chairman of the system is Ben Bernanke. - The Fed performs several key functions. First, it makes monetary policy that influences the interest rates, credit and employment climate of the United States. Second, it regulates and oversees banking institutions to ensure the financial structure that in turn protects the consumer. Third, it provides financial services to depository institutions and helps to operate the country's system of payments. It also manages the nation's monetary supply and attempts to be a mediator between the interests of banks and the financial responsibility of the federal government.
- The Federal Reserve is made up of a Board of Governors who have some (but not total) responsibilities as to the regulation and supervision of the U.S. banking system. As chairman, Ben Bernanke and sometimes other members of the board testify before Senate and House panels of the U.S. Congress, either to report on the current status of the Fed or to address current issues that arise involving the Fed's role. Often, the testimony of the chairman serves as a current economic indicator and a notification of forthcoming economic events, such as anincrease or decrease of interest rates.
