BOARD OF GOVERNORS, FEDERAL RESERVE SYSTEM: The governing, policy making body of the Federal Reserve System, consisting of 7 members, one of whom serves as the Chairman and another as Vice Chairman. The Board of Governors sets the general course of Federal Reserve policy, including the regulation of the commercial banking system. The 7 Governors also form of the core of the Federal Open Market Committee which is responsible for monetary policy. The Chairman of the Board of Governors of the Federal Reserve System is one of the most important and powerful positions in the economy.The Board of Governors, or Federal Reserve Board, is the controlling body of the Federal Reserve System. The Federal Reserve Board, comprised of 7 members appointed to staggered 14-year terms, operates with a great deal of independence from both the executive and legislative branches of government. It is charged with overseeing the policies that regulate the commercial banking system and plays a key role in setting monetary policy.
The Monetary AuthorityThe Board of Governors oversees the operation of the Federal Reserve System and exerts a great deal of control over the financial side of the macroeconomy. Operating out of Washington, D.C., the Federal Reserve Board regularly meets every other Monday (and more often if needed) to discuss, review, and implement policy actions. The Board is THE monetary authority for the U.S. economy.
An Exclusive, Diverse ClubWhile the Federal Reserve Board of Governors is not the most exclusively club in the world, it is limited to 7 members at any one time. Each member signs on for a 14-year term. To ensure a degree of political independence and provide for continuity of Board, the 7 terms are staggered at two-year intervals, with a new term beginning on February 1 of each even-numbered year. That is, one new term begins February 1, 2006, another starts February 1, 2008, and a third on February 1, 2010.Each member of the Federal Reserve Board, like other federal positions, is appointed by the President and confirmed by the Senate. The President also selects one member to serve as Chairman and one to serve as Vice Chairman, each having a 4-year term. These appointments are also subject to confirmation by the Senate. No member of the Federal Reserve Board can serve two complete 14-year terms. In general, a member is appointed to serve a single term. However, a member can finish out the remaining years of a term vacated by a predecessor, then be appointed to serve one complete 14-year term. The composition of the Board of Governors also is constructed to represent the varied interests of the country--financial, agricultural, industrial, and commercial. This is intended to prevent the board from containing ONLY members with experience in the financial industry. Geographic variety is also achieved with no two members able to come from the same Federal Reserve District. This ensures that 7 of the 12 Federal Reserve Districts, not just the New York district, are represented on the Board at any given time. Political IndependenceThe composition and structure of the Board of Governors is designed, like the rest of the Federal Reserve System, for independence from the President and Congress. The job of the Fed is to carry out policies deemed best for the economy; policies that might not necessarily be to the liking of the President or Congress.This independence is helped in several ways.
Independent, But Not IsolatedThe Board of Governors is designed to operate independently of Congress and the President, but it does not operate in a vacuum. The Board, especially the Chairman, works closely with other federal government agencies and policy makers in the pursuit of its monetary authority.The Chairman, for example, regularly meets with the Chairman of the Council of Economic Advisors and the Secretary of the Treasury to discuss the state of the economy and any needed policy actions. The Board works closely with the Federal Deposit Insurance Corporation, Comptroller of the Currency, and National Credit Union Administration to regulate commercial banks. Members regularly testify before assorted Congressional committees on macroeconomic policy, consumer protection laws, banking regulation, and other matters affecting the financial markets and the economy. By law, the Federal Reserve Board submits a report on monetary policy and the state of the economy to Congress twice a year. The Chairman regularly testifies before Congress on these reports and other topics of economic importance. And, of course, the Chairman privately meets with the President and Congressional leaders. While the Fed and the Federal Reserve Board do not receive appropriations from Congress, they are subject to annual auditing by the Government Accountability Office (formerly the General Accounting Office) as well as a public accounting firm. Advisory CouncilsThe Federal Reserve Board also formally interacts with three standing advisory councils that provide feedback and advice on policies and activities.
Federal Open Market CommitteeThe most important standing committee of the Federal Reserve System, so important it deserves special mention here, is the Federal Open Market Committee (FOMC). The FOMC is specifically charged with conducting open market operations and is more generally responsible for guiding monetary policy. It is comprised of the 7 members of the Board of Governors and 5 Presidents of Federal Reserve District Banks. The Chairman of the Federal Reserve Board is also the Chairman of the FOMC.Because New York City is the financial center of the country, the President of the New York Federal Reserve Bank is always on this committee and is invariable the Vice Chairman of the FOMC. The New York Federal Reserve Bank is charged with carrying out specific policy actions. The remaining 4 slots are shared and rotated among the remaining 11 District Banks. One slot is shared by Boston and Philadelphia. Another is shared by Dallas, Atlanta, and Kansas City. A third by Cleveland, Chicago, and Richmond. And the fourth by San Francisco, Minneapolis, and St. Louis. Actually the Presidents of all 12 Federal Reserve District Banks are present at committee meetings, but only 5 are able to vote at any given time. The 7 + 1 + 4 composition keeps the bulk of authority and power in the hands of the Board of Governors and the Chairman (the 7), while at the same time maintaining a channel for implementing monetary policy through the New York Federal Reserve Bank (the 1), as well as providing a decentralized nationwide input from the rest of the country through other Federal Reserve District Banks (the 4). The Federal Open Market Committee directs open market operations, the buying and selling of U.S. Treasury Securities, with the goal of manipulating the money supply to limit business-cycle instability and promote economic growth. The FOMC generally meets about eight times a years, on average every six weeks. Most meetings are on a Tuesday. Check Out These Related Terms... | monetary economics | monetary policy | central banking | Federal Reserve pyramid | Federal Reserve System | Chairman of the Board of Governors, Federal Reserve System | Federal Reserve Banks | Federal Open Market Committee | Federal Advisory Council | open market operations | discount rate | reserve requirements | Or For A Little Background... | fractional-reserve banking | banks | money | bank reserves | bank panic | business cycles | check clearing | money creation | macroeconomics | And For Further Study... | Federal Deposit Insurance Corporation | Comptroller of the Currency | monetary aggregates | barter | aggregate market | unemployment | inflation | bank balance sheet | gross domestic product | circular flow | goldsmith money creation | Recommended Citation: BOARD OF GOVERNORS, FEDERAL RESERVE SYSTEM, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2024. [Accessed: September 22, 2024]. |