Print
How is the Federal Reserve System structured?
The Federal Reserve System has a structure designed by Congress to give it a broad perspective on the economy and on economic activity in all parts of the nation. It is a federal system, composed basically of a central, governmental agency--the Board of Governors--in Washington, D.C., and twelve regional Federal Reserve Banks, located in major cities throughout the nation. These components share responsibility for supervising and regulating certain financial institutions and activities; for providing banking services to depository institutions and to the federal government; and for ensuring that consumers receive adequate information and fair treatment in their business with the banking system.
The Federal Reserve System has a structure designed by Congress to give it a broad perspective on the economy and on economic activity in all parts of the nation. It is a federal system, composed basically of a central, governmental agency--the Board of Governors--in Washington, D.C., and twelve regional Federal Reserve Banks, located in major cities throughout the nation. These components share responsibility for supervising and regulating certain financial institutions and activities; for providing banking services to depository institutions and to the federal government; and for ensuring that consumers receive adequate information and fair treatment in their business with the banking system.
A major component of the System is the Federal Open Market Committee (FOMC), which is made up of the members of the Board of Governors, the president of the Federal Reserve Bank of New York, and presidents of four other Federal Reserve Banks, who serve on a rotating basis. The FOMC oversees open market operations, which is the main tool used by the Federal Reserve to influence money market conditions and the growth of money and credit.
For more information see The Federal Reserve System: Purposes and
Functions, on the Board of Governors's web site.
Who owns the Federal Reserve?
The Federal Reserve System is not "owned" by anyone and is not a private, profit-making institution. Instead, it is an independent entity within the government, having both public purposes and private aspects.
As the nation's central bank, the Federal Reserve derives its authority from the Congress of the United States. It is considered an independent central bank because its decisions do not have to be ratified by the President or anyone else in the executive or legislative branch of government, it does not receive funding appropriated by Congress, and the terms of the members of the Board of Governors span multiple presidential and congressional terms.
However, the Federal Reserve is subject to oversight by Congress, which periodically reviews its activities and can alter its responsibilities by statute. Also, the Federal Reserve must work within the framework of the overall objectives of economic and financial policy established by the government. Therefore, the Federal Reserve can be more accurately described as "independent within the government."
The twelve regional Federal Reserve Banks, which were established by Congress as the operating arms of the nation's central banking system, are organized much like private corporations—possibly leading to some confusion about "ownership." For example, the Reserve Banks issue shares of stock to member banks. However, owning Reserve Bank stock is quite different from owning stock in a private company. The Reserve Banks are not operated for profit, and ownership of a certain amount of stock is, by law, a condition of membership in the System. The stock may not be sold, traded, or pledged as security for a loan; dividends are, by law, 6 percent per year.
For more information, see The Federal Reserve System: Purposes and Functions, on the Board of Governors' website.
Why did Congress want the Federal Reserve to be relatively independent?
The intent of Congress in shaping the Federal Reserve Act was to keep politics out of monetary policy. The System is independent of other branches and agencies of government. Its independence provides for its institutional credibility. It is self-financed and therefore is not subject to the congressional budgetary process.
The intent of Congress in shaping the Federal Reserve Act was to keep politics out of monetary policy. The System is independent of other branches and agencies of government. Its independence provides for its institutional credibility. It is self-financed and therefore is not subject to the congressional budgetary process.
Read a speech by Chairman Bernanke on Central Bank Independence, Transparency, and Accountability.
Since the Federal Reserve has considerable discretion in carrying out its responsibilities, to whom is it accountable?
The Federal Reserve's ultimate accountability is to Congress, which at any time can amend the Federal Reserve Act. Legislation requires that the Fed report annually on its activities to the Speaker of the House of Representatives, and twice annually on its plans for monetary policy to the banking committees of Congress. Fed officials also testify before Congress when requested.
To ensure financial accountability, the financial statements of the Federal Reserve Banks and the Board of Governors are audited by an independent outside auditor. In addition, the General Accounting Office, as well as the Board's Office of Inspector General, can audit Federal Reserve activities.
What institutions are members of the Federal Reserve System, and what does membership entail?
The nation's commercial banks can be divided into three types according to which governmental body charters them and whether or not they are members of the Federal Reserve System. Those chartered by the federal government (through the Office of the Comptroller of the Currency in the Department of the Treasury) are national banks; by law, they are members of the Federal Reserve System. Banks chartered by the states are divided into those that are members of the Federal Reserve System (state member banks) and those that are not (state nonmember banks). State banks are not required to join the Federal Reserve System, but they may elect to become members if they meet the standards set by the Board of Governors. As of March 2004, of the nation's approximately 7,700 commercial banks approximately 2,900 were members of the Federal Reserve System—approximately 2,000 national banks and 900 state banks.
Member banks must subscribe to stock in their regional Federal Reserve Bank in an amount equal to 6 percent of their capital and surplus, half of which must be paid in while the other half is subject to call by the Board of Governors. The holding of this stock, however, does not carry with it the control and financial interest conveyed to holders of common stock in for-profit organizations. It is merely a legal obligation of Federal Reserve membership, and the stock may not be sold or pledged as collateral for loans. Member banks receive a 6 percent dividend annually on their stock, as specified by law, and vote for the Class A and Class B directors of the Reserve Bank. Stock in Federal Reserve Banks is not available for purchase by individuals or entities other than member banks.
For more information, see The Federal Reserve System: Purposes and Functions, on the Board of Governors' web site.
How is the Federal Reserve funded?
The Federal Reserve's income is derived primarily from the interest on U.S. government securities that it trades through open market operations. Other sources of income are the interest on foreign currency investments held by the System; fees received for services provided to depository institutions, such as check clearing, funds transfers, and automated clearinghouse operations; and interest on loans to depository institutions (the rate on which is the so-called discount rate).
The Federal Reserve's income is derived primarily from the interest on U.S. government securities that it trades through open market operations. Other sources of income are the interest on foreign currency investments held by the System; fees received for services provided to depository institutions, such as check clearing, funds transfers, and automated clearinghouse operations; and interest on loans to depository institutions (the rate on which is the so-called discount rate).
After paying its expenses, the Federal Reserve turns the rest of its earnings over to the U.S. Treasury.
Are the Federal Reserve System and Reserve Banks ever audited?
The Board is audited annually by a major public accounting firm. In addition, the Government Accountability Office (GAO) generally exercises its authority to conduct a number of reviews each year to look at specific aspects of the Federal Reserve's activities. The audit report of the public accounting firm and a complete list of GAO reviews under way are available in the Board's Annual Report, which is sent to Congress during the second quarter of each calendar year. Monetary policy is exempt from audit by the GAO because it is monitored directly by Congress through written reports, including the semiannual Monetary Policy Report to the Congress, prepared by the Board of Governors.
The Board is audited annually by a major public accounting firm. In addition, the Government Accountability Office (GAO) generally exercises its authority to conduct a number of reviews each year to look at specific aspects of the Federal Reserve's activities. The audit report of the public accounting firm and a complete list of GAO reviews under way are available in the Board's Annual Report, which is sent to Congress during the second quarter of each calendar year. Monetary policy is exempt from audit by the GAO because it is monitored directly by Congress through written reports, including the semiannual Monetary Policy Report to the Congress, prepared by the Board of Governors.
The Board of Governors contracts with an accounting firm to conduct an audit of the Reserve Banks every year, and Board staff periodically reviews the operations of the Reserve Banks in key functional areas. The audited combined financial statements of the Reserve Banks are published in the Board's Annual Report.
The Reserve Banks, like the Board, are subject to audit by the GAO, but certain functions, such as transactions with foreign central banks and open market operations, are excluded from the GAO's audit. Each Reserve Bank has an internal auditor who is responsible to the Bank's board of directors.
May the Board of Governors and the Federal Reserve Banks give to charitable organizations?
The Federal Reserve was not established to give or lend money to individuals, private businesses, or charitable organizations. Charitable contributions by the Board or the Reserve Banks, no matter how worthy the cause, would be considered improper.
The Federal Reserve was not established to give or lend money to individuals, private businesses, or charitable organizations. Charitable contributions by the Board or the Reserve Banks, no matter how worthy the cause, would be considered improper.
How do I locate a specific Federal Reserve research paper?
For research available from throughout the Federal Reserve System, see Fed in Print, a searchable database of Federal Reserve publications.
To access all public information materials, visit the
Federal Reserve System's Publications Catalog, available through
the Federal Reserve Bank of New York's website.
Where can I find a list of all Federal Reserve Board governors since 1913?
This information can be found on the Web site of the Board of Governors at: http://federalreserve.gov/bios/boardmembersh ip.htm.
This information can be found on the Web site of the Board of Governors at: http://federalreserve.gov/bios/boardmembersh ip.htm.
What is the 'Beige Book?'
The Summary of Commentary on Current Economic Conditions by Federal Reserve District, commonly known as the Beige Book, is a report published eight times per year prior to Federal Open Market Committee (FOMC) meetings. Each Federal Reserve Bank gathers anecdotal information on current economic conditions in its District through reports from Bank and Branch directors and interviews with key business contacts, economists, market experts, and other sources. The Beige Book summarizes this information by District and sector. An overall summary of the twelve district reports is prepared by a designated Federal Reserve Bank on a rotating basis.
Access the Beige Book from the following sites:
Board of Governors This site has complete Beige Book contents going back to 1996.
Beige Book Archive This Minneapolis Fed site has Beige Book contents going back to 1970.
The Summary of Commentary on Current Economic Conditions by Federal Reserve District, commonly known as the Beige Book, is a report published eight times per year prior to Federal Open Market Committee (FOMC) meetings. Each Federal Reserve Bank gathers anecdotal information on current economic conditions in its District through reports from Bank and Branch directors and interviews with key business contacts, economists, market experts, and other sources. The Beige Book summarizes this information by District and sector. An overall summary of the twelve district reports is prepared by a designated Federal Reserve Bank on a rotating basis.
Access the Beige Book from the following sites:
Board of Governors This site has complete Beige Book contents going back to 1996.
Beige Book Archive This Minneapolis Fed site has Beige Book contents going back to 1970.
Where can I find a list of Federal Reserve Bank holidays?
A list of the holidays observed by Federal Reserve Banks and the Board of Governors of the Federal Reserve System is available on the Boa rd of Governors' website.
A list of the holidays observed by Federal Reserve Banks and the Board of Governors of the Federal Reserve System is available on the Boa rd of Governors' website.
Does the Federal Reserve control or set the prime rate?
No. Banks set their own rates for business and other credit based on the demand for various kinds of loans, on the cost of money to the banks, and on the administrative costs of making loans.
No. Banks set their own rates for business and other credit based on the demand for various kinds of loans, on the cost of money to the banks, and on the administrative costs of making loans.
Who is the current chairman of the Federal Reserve Board?
Ben Bernanke is the current chairman of the Board of Governors of the Federal Reserve System. He originally took office as Chairman on February 1, 2006, when he also began a 14-year term as a member of the Board. Ben S. Bernanke began a second term as Chairman of the Board of Governors of the Federal Reserve System on February 1, 2010.
Dr. Bernanke also serves as Chairman of the Federal Open Market Committee, the System's principal monetary policymaking body. His second term as Chairman ends January 31, 2014, and his term as a Board member ends January 31, 2020.
More information about Chairman Bernanke is available on the website of the Board of Governors.
Richmond
Public Affairs
(804) 697-8000
