1. The Federal Reserve System
Econ 11/13

2. Warm Up

3. Structure of the Fed
The Fed was created by Congress in 1913 to conduct monetary policy
It is privately owned by member banks- commercial banks that are members of and hold stock in the Fed
It is a corporation just like any other corporation
National banks must belong but other banks can decide to join or not by purchasing shares
Today members include all national banks and some state banks

4. Board of Governors
In 1935 Congress established a 7 member board of governors for the Fed
Each member is appointed by the President and approved by the Senate
They serve a staggered 14-year term
The board supervises and regulates the activity of the Fed
Also make a report to Congress each year about national and international monetary matters

5. Federal Reserve District Banks
Originally it was just the 12 district banks.
Now there are also 25 additional branch banks located so that they can be near the commercial banks.
District banks accept the deposits of and make loans to banks

6. Committees
Federal Open Market Committee: FOMC makes decisions about the growth of the money supply and level of interest rates
Primary monetary policy-making body
Advisory Committees: 3 advisory committees

7. Regulatory Responsibilities
Fed is responsible for monitory the reserves of its member banks
Authority over bank holding companies- corporations that own one or more banks
Authority to supervise and regulate foreign banks located in the US and US banks’ international operations
Approves mergers of its member banks

8. Other Responsibilities
The Fed is also responsible for clearing checks
Fed routes checks to the correct banks via routing numbers on your checks
Fed clears millions of checks everyday
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9. Other Responsibilities
Currency: paper money is issued by the Fed and printed at the Bureau of Engraving and Printing
Coins are made by the Bureau of the Mint and shipped to the Fed for storage
When banks need additional physical money they call the Fed to fulfill their needs
The Fed can also replace currency/coins that are broken or damaged in some way. They destroy the old money so that it is not put back into circulation
It also maintains accounts for the IRS and Social Security and acts as the US federal government’s bank