What is the Fed? This is the US central bank or "secret society"

The Federal Reserve System (FRS) is the central bank of the United States. It was established in December 1913 as an organ to prevent systematic crises. Gradually, his functions and powers were significantly expanded. But what is the Fed? Is it a "secret society" or just another central bank, even the richest country in the world?

Main functions

The main purpose of the Federal Reserve is to conduct monetary policy. Thus, the following answer to the question what exactly is the Federal Reserve is absolutely correct: it is a body in the United States that regulates the amount of money in circulation by setting the norm of mandatory reserves, refinancing rates and open market operations. The Federal Reserve System is responsible for managing inflation and maintaining price stability. Also, the US Federal Reserve seeks to achieve maximum employment. The main function of this body is sustainable economic development of the country. What it is? The Fed provides for GDP growth of 2-3% per year. However, the appointment of the Federal Reserve System is not limited to this. The meeting of the Federal Reserve may concern the regulation of commercial banks for the protection of consumers' rights. Also, the discussion may be related to maintaining the stability of financial markets and preventing potential crises. Moreover, the FRS provides services to the US government, federal and foreign banks.

Structure

Consideration of what it is - the Fed, would not be complete without studying the components of this body. There are three in total. The Governing Council is the main organ. He manages monetary policy. The Board of Governors of the Federal Reserve System includes seven members. They are responsible for setting the discount rate and reserve requirements for member banks. Any decision by the Fed is based on an analysis that is conducted by its employees. Every month, all conclusions are published in the so-called "Beige Book", every six months the Monetary Report of the Congress is published. Another component is the Federal Open Market Committee (FOMC). Its task is to set a target rate for funds. The Federal Committee includes members of the Governing Council and 4 of the 12 presidents of member banks. This body meets eight times a year. Another component of the Fed is the member banks themselves. They oversee the commercial financial structures and monitor the implementation of the selected monetary policy. Each of the 12 member banks is in their county.

History of origin

The first attempts to create a more flexible monetary system in the US were made as far back as the 18th century. The first and second banks were established in 1791 and 1816 respectively. Each of them existed for about 20 years. Both the First and Second Bank had branches throughout the country and served the government, monetary institutions and private clients. In general, their activities were satisfactory. However, a significant part of the population did not trust them. Lowering their authority was due to the aggravation of political contradictions, so they closed. The panic of 1907 pushed Congress to create a Federal Reserve System. The National Monetary Commission was established to assess methods of preventing permanent financial panics and bankruptcies of enterprises. In 1913, Congress adopted the Federal Reserve Act. Initially, it was planned that the Fed will have much less authority than we see now. She had to deal with the support of the creation of member banks, the increase in the elasticity of the currency and the effectiveness of the entire system as a whole. However, gradually the range of powers of the body in question has significantly expanded, which is connected with the periodic emergence of crises requiring state intervention.

Who owns the Fed?

The Federal Reserve System is an independent bank. The decisions of the FOMC and the Board of Governors are based on the research of FRS employees. They are not ratified by the President, the Ministry of Finance and the Congress. That is, they are independent. However, members of the Board of Governors are elected by the President and approved by Congress. Thus, the state controls the long-term policy of the Federal Reserve System. Some officials refer to the latter with such suspicion that they see the need for a complete cessation of its activities. Senator Rand Paul believes that the audit of the system should be carried out more carefully.

Role of the Chairman

The head of the FRS sets the direction of monetary policy. In the period from 2014 to 2018, the chairman is Janet Yellen. She focused on overcoming unemployment, which was her scientific specialty. Therefore, it lowers interest rates. Many experts believe that its actions only exacerbate the crisis, and the economy needs stabilizing measures to stabilize. From 2006 to 2014 the chairman was Ben Bernanke. He was an expert on the role of the Fed during the Great Depression. It was thanks to Bernanke that the consequences of the recent recession were mitigated.