The Pros And Cons Of The Federal Reserve System

875 Words 4 Pages
The Federal Reserve System, the main group who control the money supply in the United States. The Federal Reserve consists of 12 Federal Reserve district banks with 25 branches. The Federal Reserve System is the central banker for the nation and provides banking services to commercial banks, the federal government, and other financial institutions. They also regulate, supervise and is responsible for policies concerning money. The president and congress consult with the Federal Reserve System to control the size of the money supply to influence the economy’s performance. In the twentieth century, the movement of the United States gained strength to establish a central banking system, but soon resulted in a series of bank failures in the Panic …show more content…
The chair of the Fed reports to Congress about twice each year and coordinates its actions with the U.S. Treasury and the president. Congress is held responsible for overseeing the Fed, but most of the decisions tend not to interfere daily. As I stated earlier, the Federal Reserve System consists of 12 central banks. These 12 banks service financial institutions and banks. Each Federal Reserve Bank serves as a central banker for the private banks in its region. The reason for this structure is the result of a compromise between the traditionalists. The traditionalists favored a single bank, the Populists, distrusted concentration of financial power in the hands of a few banks. The Board of Governors is the Fed’s governing body. The seven members appointed by the president and confirmed by the U.S. Senate who serve for one nonrenewable 14-year term. Their responsibility is to control and supervise the money supply and the banking of the United States. These 14-year terms are scheduled differently so one term expires every 2 years. This tem prevents a president from accepting a board of new members favoring the interests of the political party. The president designates one member of the Board of Governors to serve chair for a four-year term. In this position, the individual selected is sought to be the spokesperson for the Fed and has an amount of power over many policy decisions. Thought the …show more content…
Financially this creates autonomy for the Fed, by removing the fear of congressional review of its budget. Since congress doesn’t fund the Federal Reserve system, the Fed receives its funding by the government securities issued by the U.S. Treasury. By holding government securities, the Fed earns interest income from the government securities to be able to loan it to depository institutions. The Fed doesn’t keep all profits earned, but returns it to the Treasury. Because of this motivation, polices are enacted which promote the economy’s sustainability and development. The Board of Governors is self-regulating, and self-supporting authority of the Federal Reserve

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