Federal Reserve

The Federal Reserve System (also known as the Federal Reserve or simply the Fed) is the central banking system of the United States of America. It was created on December 23, 1913, with the enactment of the Federal Reserve Act, after a series of financial panics (particularly the panic of 1907) led to the desire for central control of the monetary system in order to alleviate financial crises.[list 1] Over the years, events such as the Great Depression in the 1930s and the Great Recession during the 2000s have led to the expansion of the roles and responsibilities of the Federal Reserve System.[6][11][12]

Federal Reserve

Seal of the Federal Reserve System


Flag of the Federal Reserve System
HeadquartersEccles Building, Washington, D.C., U.S.
EstablishedDecember 23, 1913 (107 years ago) (1913-12-23)
Governing bodyBoard of Governors
ChairJerome Powell
Vice ChairRichard Clarida
Central bank ofUnited States
CurrencyUnited States dollar
USD (ISO 4217)
Reserve requirementsNone[1]
Bank rate0.25%[2]
Interest rate target0% to 0.25%[3]
Interest on reserves0.10%[4]
Interest paid on excess reserves?Yes
Websitefederalreserve.gov
Federal Reserve
Agency overview
JurisdictionFederal government of the United States
Child agency
Key document

The U.S. Congress established three key objectives for monetary policy in the Federal Reserve Act: maximizing employment, stabilizing prices, and moderating long-term interest rates.[13] The first two objectives are sometimes referred to as the Federal Reserve's dual mandate.[14] Its duties have expanded over the years, and currently also include supervising and regulating banks, maintaining the stability of the financial system, and providing financial services to depository institutions, the U.S. government, and foreign official institutions.[15] The Fed also conducts research into the economy and provides numerous publications, such as the Beige Book and the FRED database.

The Federal Reserve System is composed of several layers. It is governed by the presidentially appointed board of governors or Federal Reserve Board (FRB). Twelve regional Federal Reserve Banks, located in cities throughout the nation, regulate and oversee privately owned commercial banks.[16][17][18] Nationally chartered commercial banks are required to hold stock in, and can elect some of the board members of, the Federal Reserve Bank of their region. The Federal Open Market Committee (FOMC) sets monetary policy. It consists of all seven members of the board of governors and the twelve regional Federal Reserve Bank presidents, though only five bank presidents vote at a time (the president of the New York Fed and four others who rotate through one-year voting terms). There are also various advisory councils. Thus, the Federal Reserve System has both public and private components.[list 2] It has a structure unique among central banks, and is also unusual in that the United States Department of the Treasury, an entity outside of the central bank, prints the currency used.[23]

The federal government sets the salaries of the board's seven governors, and it receives all the system's annual profits, after dividends on member banks' capital investments are paid, and an account surplus is maintained. In 2015, the Federal Reserve earned a net income of $100.2 billion and transferred $97.7 billion to the U.S. Treasury.[24] Although an instrument of the US Government, the Federal Reserve System considers itself "an independent central bank because its monetary policy decisions do not have to be approved by the President or by anyone else in the executive or legislative branches 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."[25]