Federal Reserve System Research Paper

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The Federal Reserve System is one of the most important aspects of the financial system of the United States. The Federal Reserve System is sometimes referred to as the Federal Reserve, but it is most often referred to as the Fed. It is the central bank of the United States and was created more than one hundred years ago on December 23, 1913 by President Woodrow Wilson. President Wilson signed the Federal Reserve Act making it a law in order to establish the Fed. Moreover, Congress created it with the goal of providing a safer, more stable, and more flexible monetary and financial system for the United States. The one thing about the Federal Reserve Act that President Wilson signed into law is that it is not going to expire. In the beginning, …show more content…
The Board of Governors consists of seven members with headquarters in Washington, D.C. The Fed also has twelve reserve banks in major cities throughout the United States: Atlanta, Boston, Chicago, Cleveland, Dallas, Kansas City, Minneapolis, New York, Philadelphia, Richmond (Washington, D.C.), San Francisco, and St. Louis. Each of the seven members serves a fourteen-year term after being appointed by the President and confirmed by the Senate. The most important duty of the Board of Governors is to formulate monetary policy. This includes working with the reserve banks in order to determine the discount rate policy as well as setting reserve requirements. The Open Market is referred to as the Federal Open Mark Committee, or the FOMC. Composed of 12 members, the FOMC includes the seven members of the Board of Governors and the five reserve bank presidents. When the committee does meet, it restricts the attendance due to the confidential nature of the discussions. When its members do meet, they must be in agreement as to the appropriate action for policies. The main job of the FOMC is to influence the total amount of credit and money that is available in the national …show more content…
These reserve banks hold cash reserves of depository institutions which gives them the ability to make loans to such institutions. It is through these loans that the Federal Reserve Banks are able to generate income. They do so by the interest earned during the course of monetary policy actions, mostly through the interest earned on government securities. These banks have four main duties: currency and coin, wire transfers, and automated clearing houses. They distribute currency and coin to smaller depository institutions by institutions which allows such institutions to meet the public’s need for cash. They also process checks by acting as the main check-clearing system. In addition to this, they deal with wire transfers because the communications system serves as a network through which funds and securities can be transferred nationwide from depository institutions. Lastly, the Federal Reserve Banks function as automated clearing houses meaning they permit the electronic exchange of payments between depository institutions as computerized facilities. The fourth part of the Fed is the Board of Directors, which consists of three classes: Class A, Class B, and Class C. Each Class has a slight variant of the jobs that they perform. The members of this board cannot be a part of Congress and do not act as members for their full-time jobs. The board

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