Structure of the Fed

The Federal Reserve System is owned by its member banks.

The Board of Governors establishes policies for the Federal Reserve and member banks to follow, regulates certain operations, and controls the money supply.

The 12 Federal Reserve district banks and 25 branch banks are located near the commercial banks they serve.

The Federal Open Market Committee (FOMC) makes decisions about the growth of the money supply. http://www.federalreserve.gov/fomc/fundsrate.html

Question What is the main function of the Federal Reserve? How does the Fed perform this function? The function of the Fed is to control the money supply. The primary instrument the Fed uses to affect the money supply is the FOMC.

II. Regulatory Responsibilities A. The Fed monitors member banks’ reserves. B. The Fed oversees bank holding companies.

C. The Fed oversees foreign banks operating in the United States as well as the international operations of U.S. member banks and holding companies operating abroad. D. The Fed approves bank mergers.

Why might the Fed disapprove of a merger between two large banks? because it might limit competition

III. Other Federal Reserve Services A. The Federal Reserve is responsible for check clearing. B. The Federal Reserve is responsible for extending truth-in-lending disclosures

C. The Federal Reserve is responsible for issuing paper currency. D. The Federal Reserve is responsible for providing financial services to the federal government.

Why is it important that the Federal Reserve remain politically independent? Since the Fed provides financial services for the government, it should be independent and not be influenced by politics.