The Fed

The Fed

Established by Congress in 1913, The U.S. Federal Reserve was created to present the country with a more secure and more elastic economic and financial structure. It serves as the central bank for the United States banking system and the institution that holds the primary responsibility for the making and execution of American monetary policies. The Fed’s basic tenet is to 1) maintain stable prices (control inflation) and 2) ensure maximum employment and production output. Although technically independent, the Fed must act within the framework of the overall objectives of economic and financial policy established by Congress. The Federal Reserve is comprised of the Board of Governors in Washington D.C. and twelve regional Federal Reserve Banks (Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas & San Francisco).

The Federal Reserve System's highest decision-making body is its Board of Governors, which consists of seven members. Members of the Fed's Board of Governors are nominated for their positions by the President of the United States and then must be confirmed by a majority vote of the Senate before taking office. The members of the Federal Reserve's Board of Governors serve very long terms (fourteen years) and, once appointed and confirmed, they may not be removed from office by either President or Congress. The exception to this would be via an impeachment process for a severe criminal offense. The terms of the Governors are staggered, so that only one Governor's term expires every two years. This makes is highly unlikely that any President would be able to dominate the Board with a majority of his own appointees until near the end of his own second four- year term in office. The President does at least get the opportunity to designate which one of the seven Governors will serve for the next four years as Chairman of the Board of Governors and exercise "moral...