How is the Federal Reserve structured?
The Federal Reserve System, also known as the “Fed” is the nation’s central bank. In 1913, the Fed was established by an Act of Congress consisting of the Board of Governors in Washington , D.C. , & 12 Federal Reserve District Banks. Congress structured the Fed to be independent within the government. However, the Fed is accountable to Congress and its agenda is set by laws. “The Federal Reserve reflects the conviction that the people who control the country’s money supply should be independent of the people who frame the government’s spending decisions.”
What makes the Fed independent?
3 structural features give the Federal Reserve independence with its conduct of monetary policy:
- Appointment procedure for Governors
- Appointment procedure for Reserve Bank Presidents
- Independent funding.
How is the Fed “independent within the government”?
Even though the Fed is independent of Congressional appropriations and administrative control, it is ultimately accountable to Congress and comes under government audit and review. Fed officials report regularly to the Congress on monetary policy, regulatory policy, and a variety of other issues, and they meet with senior Administration officials to discuss the Federal Reserve’s and the federal government’s economic programs. The Fed also reports to Congress on its finances.
Who makes monetary policy?
The Federal Reserve has created the Federal Open Market Committee, which have the focal responsibility for conducting monetary policy. The FOMC meets in Washington 8 times a year and has a total of 12 members
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