Yesterday, introduced you into the fundamentals of the Fed. Today will take a look at what is inside the Fed. No its not candy.
The Fed is broken up into 3 subsections. The Board of Governors (BOG) serves 
as the government section of the Fed. They are based in Washington D.C. and lead by the chairman. That chairman is appointed by the president and approved by the Senate. As the current chairman, Ben Bernanke must lead BOG meetings and help set the monetary policies that we hear about in the news all the time. Bernanke reports to Congress twice a year and other members of the BOG report as requested. The BOG serves as a central location for the Fed to debate economic indicators and set policies based on them.
The Reserve Banks are the decentralized portion of the Fed. These banks are located all over the country in populated regional areas. Many of these banks are broken up into smaller branches as well. An example is the San Francisco Federal Reserve Bank has a branch on Los Angeles. These banks will serve the needs of other banks. If my bank has an excess of cash I can keep it with my local reserve bank. They also conduct economic analysis of their respective regions and report this to the other sections of the Fed. Each Reserve bank has its own board of directors. Combined, they represent the public and the commercial banks. One final duty of the Reserve banks is to supervise commercial banks in their regions.
There is one more organization within the Fed. This group is actually a combination of rotating Reserve Directors and members of the BOG. The Federal Open Market Committee (FOMC) is also chaired by the chairmen of the BOG. This body meets 8 times a year to finalize and implement the policies of the Fed. The regional membership provides the domestic and local economic indicators. The head of the New York region has a permanent seat on the FOMC and provides the international data. Once the FOMC makes their policy vote, their decision is released to the public.
Our last stop with the Fed will be tomorrow, where I’ll talk about my own opinion of the Fed, and some criticisms that smarter people have thought of.
 By The Weakonomist |
The Weakonomist is the founder of Weakonomics. Clicking the picture of the puppy will tell you more about him. If you like what you're reading consider subscribing to the blog, following him on Twitter, and checking out the related posts below. Please consider a donation if you really enjoy Weakonomics. Also keep in mind that nothing I say can be construed as financial advice. |
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