Federal Reserve System
The Federal Reserve is the central bank for the United States ofAmerica and was formed on December 23, 1913. The Federal Reserve System wascreated by the Act of Congress and today is basically responsible for theformulation of monetary policy; help in regulating the various financialinstitutions as well as maintaining stability within the US financialsystem. In doing so it serves the US government as well as the public,financial institutions and foreign exchange. Thus, the Federal Reserveperforms the function of regulation, supervision, government services, andissuance of currency, checking/clearing services for banks and wiretransfer services (Hunt 1999). These rudimentary services support othermajor and public administration services such as ensuring that thegovernment formulates budgets for its various resources, allocatingresources according to the needs of the people as well as predicting theeconomy's performance in the current and future years. This complex systemof banking act as the state bank and the government's bank. Some of thedetails of the above features are discussed in the following paperenumerating the roles and responsibilities of the various components of the
Open market operations are basically a tool that allows the governmentto buy and sell US government securities in the market. The basic objective of having the Board members is to formulatemonetary policy and how the groups enable the President in making decisionsrelating to the public sector administration. Furthermore, the President and theSenate are also responsible for the assignment of the Board Chairman andVice President. There are times when the Federal Reserve is also responsiblefor levying banking services to the government such as Treasury bills,notes and bonds along with securities and saving bonds that allows thegovernment to generate more funds from the public albeit in the form ofcredits (Kaplan 2003). This may encompass the discussionrelating to reserve requirements or the evaluation of the changing economicconditions prevalent in the country that would eventually affect theFederal Reserve Bank. Regulator As a regulator, the Federal Reserve can mandate certain regulationspertaining to the monitoring banks and members of the banking group. These governors are to serve theFederal Reserve for tenure of 14 years. And since the Federal Reserve deals in electronicallytransferred funds as well it also acts as a monitoring authority of theconsumer banks that are engaged in such transactional activities. Ultimately the Federal Reserve has to use a combination of the threetools along with fiscal policies in order to achieve its monetary targets. Thereare seven members in the Board of Governors who are appointed by thePresident and approved by the Senate. However, it differs in that it also deals in national payments and keepschecks and balances. Discount rate is another tool that effectively allows the governmentto levy interest rate on short and long term loans to the banks. Not only has this, but the Federal Reserve often need to meet up withthe government officials in order to discuss issues relating to bankingindustry and financial institutions. The Board of Governors The System consists of a board of governors in Washington DC andReserve Banks scattered in different cities that act as support andrepresentation of the different states, to the Federal Reserve Bank. What thisbasically does is lower or raise the funds rate according to the predictionof future demands.
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