central bank jefferson city mortgage rates

Their parent company Central Bancompany was founded more than 100 years ago, and is headquartered in Jefferson City, Missouri. Those bank. Online Banking. decorative image. Become a Member. decorative image. Apply for a Loan. decorative image. Rates. decorative image. Credit Cards. The inputs and best auto loan period continued showing, where are a recourse state to central bank jefferson city mortgage rates for nearly.

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Central bank jefferson city mortgage rates
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Central bank jefferson city mortgage rates -

Saint Louis, MO 63131. By clicking 'Continue', you will leave our website and enter a site specific to making your loan payment via a debit card or electronic check. Thu. Found inside – Page 309'Inflation targeting: a view from the ECB', Federal Reserve Bank of St. Louis Review 86, 4: 169–79 2005. 'Why did the great inflation not happen in Germany? 9:00a.m. 314-862-8300. www.centralbank.net. ATM Only/No Branch. Minutes of the August 2021 Monetary Policy Meeting of the Reserve Bank Board. Hope, renewal, and a hollowing out to produce new fruit - it's all part of the beautiful story told by The Thread STL. Reviews (314) 835-3700 Website. Route planning. Get reviews, hours, directions, coupons and more for Central Bank Of St. Louis at 3700 New Town Blvd, Saint Charles, MO 63301. The bank also has 3 more offices in one states. Locations. Found inside – Page 164However , the banking community continued to push for reform and found an ally ... of the House Banking and Currency Committee.19 Festus Wade , a St. Louis ... 9:00 AM - 5:00 PM. A total of 3 customers had cast their vote for 15 branches and in average, Central Bank of St. Louis got a score of 5.0 out of 5 stars. 0. As an employee of the Federal Reserve Bank of St. Louis, one of the 12 District banks of the Federal Reserve — the central bank of the United States — your work contributes to the growth and stability of our nation's economy. The Fed's emergency lending programs—like those used during the pandemic—are authorized under Section 13(3) of the Federal Reserve Act. It is also the 302 nd largest bank in the nation. 2,230 people follow this. This icon indicates a link to third-party content. « Swipe for More ». Found inside – Page 308... CENTERRE BANK OF KANSAS CITY , NA ST ST LOUIS ST 804383 CENTERVILLE 823680 150 W GREENE ST PO DRAWER 748 MILLEDGEVILLE 817020 CENTRAL AND SOUTHERN BANK ... Their corporate headquarters is listed as: 500 West Coates Street in Moberly Missouri. Banks Commercial & Savings Banks Savings & Loan Associations. Recommended Reviews . Monthly, Seasonally Adjusted Jan 1918 to Nov 2019 . Have a question? Central Bank of St. Louis 7707 Forsyth Blvd. Central Bank of St. Louis Wildwood branch operates . Found inside – Page 142only to recall the impressive innovative intellectual output of the perenially maverick Federal Reserve Bank of St Louis; the pioneering contributions of ... Sign in to your account Welcome back! by Institution. All drive-thru services and hours remain unaffected. The assigned Fed RSSD ID of Central Bank of St. Louis is 506249. The Reserve Bank's Corporate Plan for 2021/22 31 August 2021, 11.30 am AEST . This financial institution takes the time to serve the needs of the community with localized decision-making. That authority is rarely used, said David Wheelock, a senior vice president and special policy advisor to St. Louis Fed President James Bullard.Wheelock answered questions about the 13(3) authority, and when and how the Fed wields it. List of St. Charles Banks. Conveniently make your loan payment with a debit card or electronic check! Central Bank of St. Louis currently operates with 15 branches located in 2 states. CENTRAL BANK OF ST. LOUIS Locations. The full address of bank headquarters is 7707 Forsyth Boulevard, Clayton, MO 63105. The bank also has 12 more offices in one states. Banks & Credit Unions; Missouri; St. Louis; Central Bank of St. Louis in St. Louis, MO - 3 Locations; Central Bank of St. Louis in St. Louis, MO » 3 Locations. Andrea V. Manchester, MO. Website Services. Found inside – Page 19facilities and (2) creating the confidence-building Fed-led bank stress tests in ... banks—St. Louis and Kansas City—but this occurred because Champ Clark, ... We identified 1,055 potential deserts in 2014, of which 204 were in urban areas and 851 in . Found insideTo me, the policy of the Russian central bank during the sudden stop in emerging markets was exemplary of what needs to be ... 1 St. Louis adjusted monetary ... Refine by Locations: within: miles of: View List Map: Sorted by: Name Location Rating: 1-10 of 17 bank branches. If you want to buy or refinance your home, start with our Mortgage Center. Get started by clicking 'Continue' below¹.

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next page > 3 reviews . Found inside – Page 108Santoni , G. J. ( 1984 ) ' A private central bank : some olde English lessons ' , Federal Reserve Bank of St Louis Review , 66 , 4 . Found inside – Page 252International Evidence from Central Bank Forecasts , in : Federal Reserve Bank of St. Louis Review , Vol . 84 , No. 4 , 2002 , p . 99-118 . Log in to your account . Refine by Locations: within: miles of: View List Map: Sorted by: Name Location Rating: 1-10 of 14 bank branches. Basic Info Reviews History Routing Number Locations. Location & Hours. He was incredible to work with. Found inside – Page 351Federal Reserve Bank of St. Louis Review, March/April, 3–12. ... C.E. (1995b), 'Is New Zealand's Reserve Bank Act of 1989 an optimal central bank contract? Found inside – Page 40United Illinois Bank of Southern Illinois merged with its affiliate, Central Bank with 14 locations in the metro east St. Louis region. Address. Wed. 9:00 AM - 5:00 PM. Central Bank has an A+ health rating. Found inside – Page 546Federal Reserve Bank of St. Louis Review, January/February 2013. https://research.stlouisfed.org/publications/review/13/01/Fawley.pdf. Felkerson, James. Banks & CUs ATMs Search Manage Listing. By clicking on the link, you will leave our website and enter a site not owned by the bank. Headquartered in Clayton, MO, it has assets in the amount of $1,583,672,000. As one of the leading banks in St. Louis and throughout the rest of Missouri, Central Bank has had a presence in the area for more than 110 years. At that point, we'll see "whether inflation has moderated," he said. Try one of our Financial Calculators. Found insideSource: FRED, Federal Reserve Bank of St. Louis. The upshot is that the concept of central bank independence has become distorted, and the crisis has served ... Cool 10. Personal. In the event of a lost or stolen card, contact us anytime day or night to avoid fraud. Found inside – Page 58Goodhart, C.A.E. (1995a), the Central Bank and the Financial System, ... Policy Decision on Interest Rates', Federal Reserve Bank of St Louis Review, 83(4). 10704 West Florissant Avenue. Central Bank opening hours Clayton, MO. Central Bank of St. Louis is the 35th largest bank in Missouri with 12 branches; 232nd in Illinois with 3 branches. 17 August 2021. 10 Central Bank of St Louis $75,000 jobs available in Columbia, IL on Indeed.com. Federal Reserve Bank of St. Louis President James Bullard is ready to start slowing the pace of central bank bond buying as soon as his colleagues are, worried in part . Non customer contact positions can provide more flexible hours, depending on the business needs of the department. Found inside – Page 533a central bank's exposure to challenges of its actions because conflicts ... Fed is a well-designed central bank' (2011) Federal Reserve Bank of St. Louis ... Edit business info. Directions. Central Bank of St. Louis currently operates with 15 branches located in 2 states. Related Posts. BanksForge. ATM Open 24 Hours. 12 August 2021 Media Release 2021-15. Lender APR Rate (%) Monthly Payment Learn More ; NMLS ID: 2890 License#: MC-3098: 2.569% 2.500% 0.88 points $2,275 fees . Its customers are served from 15 locations. Central Bank of Branson. Central Bank of Moberly has 4 banking locations. Updated on June 18, 2021. Found inside – Page 315Crow, J. (1994), “Central Banks: Independence, Mandates and Accountability,” ... Developments,” Review of the Federal Reserve Bank of St. Louis, 68: 5–17. Saint Louis, MO 63129. Find 73 listings related to Central Bank Of St Louis in Saint Louis on YP.com. Bank of Springfield's 13 locations include branches in Springfield, Jacksonville, Chatham, Quincy, Staunton, Glen Carbon, the Metro East, and St. Louis. Can you afford that home? Lender APR Rate (%) Monthly Payment Learn More ; NMLS ID: 1657322: 2.521% 2.500% 0.25 points $682 fees $988 . Phone: (763) 852-6485. First National Bank of St . phone. Find a Location near you. Opens in 18 h 26 min. Found inside – Page 140Evidence from the Federal Funds Rate Beck (1987) explicitly links. Source: Federal Reserve Economic Database. Federal Reserve Bank of St. Louis. 140 Central ... Saint Louis Bank chose The Last Hotel to host an event supporting LaunchCode, a nonprofit matching people with world-class learning resources and job opportunities to help launch careers in technology. Page 1 of 2. Regulation F. For the purpose of maintaining compliance with Regulation F, we are providing our correspondent customers with our Second Quarter 2021 Capital and Leverage Ratios. Nov 14, 2014Changed institution class to Insured Commercial Or Savings Banks, State, Members FRS, Nov 14, 2014Changed primary regulatory agency from Comptroller of the Currency to Federal Reserve Board, Nov 14, 2014Changed name to Central Bank Of St. Louis, Nov 05, 2007Acquired First National Bank of Millstadt (3816) in Millstadt, IL, Mar 01, 2001Acquired Midamerica Bank of St. Clair County (34118) in O Fallon, Il. Found inside – Page 318Cukierman, A. (1986), 'Central bank behavior and credibility – some recent developments', Federal Reserve Bank of St. Louis Review, 68, 5–17. Below you will find ratings, reviews, corporate information, directions, online banking website, and branch locations. Found insideThe practice of central bank intervention: Looking under the hood. Federal Reserve Bank of St. Louis Review. Neely, C. J. (2005, November/December). Below you will find ratings, reviews, corporate information, directions, office hours, their phone number, online banking website, and branch locations. - 5:00p.m. 12230 Manchester Road. You can also scroll down the page for a full list of all Central Bank of St. Louis Missouri branch locations with addresses, hours, and phone numbers information. The bank operates as a subsidiary of Central Bancompany, Inc. Search for other Commercial & Savings Banks in Saint Charles on The Real Yellow Pages®. Found inside – Page 140Federal Reserve Bank of St. Louis Review, 87(2), 65–83. Jansen, D. (2008). Has the clarity of Humphrey–Hawkins testimonies affected volatility in financial ... St. Louis Fed President James Bullard says the central bank should have its tapering process finished by the end of March 2022. Personal Banking Enroll. View hours, phone numbers, reviews, routing numbers, and other info. Ask the Community. Central Bank of St. Louis Branch Location at 12224 Tesson Ferry Road, St. Louis, MO 63128 - Hours of Operation, Phone Number, Routing Numbers, Address, Directions and Reviews. 2. Central Bank of St. Louis. Research hub. Below is a list of some important events in banks history, including mergers and acquisitions. Central bank and monetary authority websites . Our analysis is based on demographic and economic data collected for the county subdivision in which each branch is located. Central Bank of St. Louis Wildwood branch operates . Send a message to customer support through our secure email channel. Central Bank of Lake of the Ozarks has 9 banking locations. Primary Phone: (636) 300-4615 Phone: (636) 300-4616 Primary Phone: (636) 300-4616 Payment method amex, check, discover, master card, visa Neighborhood Saint Charles AKA. He kept us informed, was in constant contact, advised us well and we felt . Find . The assigned Fed RSSD ID of Central Bank of St. Louis is 506249. The site you will enter may be less secure and may have a privacy statement that differs from the bank. Click on any of the links below to find a location near you. In the meantime you may wish to consider these offerings: Featured - Missouri 30 Year Fixed Mortgage Rates 2021. CENTRAL BANK OF ST. LOUIS has 16 banking locations. Services. Central Bank

Central Bank

What Is a Central Bank?

A central bank is a financial institution given privileged control over the production and distribution of money and credit for a nation or a group of nations. In modern economies, the central bank is usually responsible for the formulation of monetary policy and the regulation of member banks.

Central banks are inherently non-market-based or even anti-competitive institutions. Although some are nationalized, many central banks are not government agencies, and so are often touted as being politically independent. However, even if a central bank is not legally owned by the government, its privileges are established and protected by law.

The critical feature of a central bank—distinguishing it from other banks—is its legal monopoly status, which gives it the privilege to issue banknotes and cash. Private commercial banks are only permitted to issue demand liabilities, such as checking deposits.

Key Takeaways

  • A central bank is a financial institution that is responsible for overseeing the monetary system and policy of a nation or group of nations, regulating its money supply, and setting interest rates.
  • Central banks enact monetary policy, by easing or tightening the money supply and availability of credit, central banks seek to keep a nation's economy on an even keel.
  • A central bank sets requirements for the banking industry, such as the amount of cash reserves banks must maintain vis-à-vis their deposits.
  • A central bank can be a lender of last resort to troubled financial institutions and even governments.

Understanding Central Banks

Although their responsibilities range widely, depending on their country, central banks' duties (and the justification for their existence) usually fall into three areas. 

First, central banks control and manipulate the national money supply: issuing currency and setting interest rates on loans and bonds. Typically, central banks raise interest rates to slow growth and avoid inflation; they lower them to spur growth, industrial activity, and consumer spending. In this way, they manage monetary policy to guide the country's economy and achieve economic goals, such as full employment.


Most central banks today set interest rates and conduct monetary policy using an inflation target of 2-3% annual inflation.

Second, they regulate member banks through capital requirements, reserve requirements (which dictate how much banks can lend to customers, and how much cash they must keep on hand), and deposit guarantees, among other tools. They also provide loans and services for a nation’s banks and its government and manage foreign exchange reserves.

Finally, a central bank also acts as an emergency lender to distressed commercial banks and other institutions, and sometimes even a government. By purchasing government debt obligations, for example, the central bank provides a politically attractive alternative to taxation when a government needs to increase revenue.

Example: The Federal Reserve

Along with the measures mentioned above, central banks have other actions at their disposal. In the U.S., for example, the central bank is the Federal Reserve System, aka "the Fed". The Federal Reserve Board (FRB), the governing body of the Fed, can affect the national money supply by changing reserve requirements. When the requirement minimums fall, banks can lend more money, and the economy’s money supply climbs. In contrast, raising reserve requirements decreases the money supply. The Federal Reserve was established with the 1913 Federal Reserve Act.

When the Fed lowers the discount rate that banks pay on short-term loans, it also increases liquidity. Lower rates increase the money supply, which in turn boosts economic activity. But decreasing interest rates can fuel inflation, so the Fed must be careful.

And the Fed can conduct open market operations to change the federal funds rate. The Fed buys government securities from securities dealers, supplying them with cash, thereby increasing the money supply. The Fed sells securities to move the cash into its pockets and out of the system.

A Brief History of Central Banks

The first prototypes for modern central banks were the Bank of England and the Swedish Riksbank, which date back to the 17th century. The Bank of England was the first to acknowledge the role of lender of last resort. Other early central banks, notably Napoleon’s Bank of France and Germany's Reichsbank, were established to finance expensive government military operations.

It was principally because European central banks made it easier for federal governments to grow, wage war, and enrich special interests that many of United States' founding fathers—most passionately Thomas Jefferson—opposed establishing such an entity in their new country. Despite these objections, the young country did have both official national banks and numerous state-chartered banks for the first decades of its existence, until a “free-banking period” was established between 1837 and 1863.

The National Banking Act of 1863 created a network of national banks and a single U.S. currency, with New York as the central reserve city. The United States subsequently experienced a series of bank panics in 1873, 1884, 1893, and 1907. In response, in 1913 the U.S. Congress established the Federal Reserve System and 12 regional Federal Reserve Banks throughout the country to stabilize financial activity and banking operations. The new Fed helped finance World War I and World War II by issuing Treasury bonds.

Between 1870 and 1914, when world currencies were pegged to the gold standard, maintaining price stability was a lot easier because the amount of gold available was limited. Consequently, monetary expansion could not occur simply from a political decision to print more money, so inflation was easier to control. The central bank at that time was primarily responsible for maintaining the convertibility of gold into currency; it issued notes based on a country's reserves of gold.

At the outbreak of World War I, the gold standard was abandoned, and it became apparent that, in times of crisis, governments facing budget deficits (because it costs money to wage war) and needing greater resources would order the printing of more money. As governments did so, they encountered inflation. After the war, many governments opted to go back to the gold standard to try to stabilize their economies. With this rose the awareness of the importance of the central bank's independence from any political party or administration.

During the unsettling times of the Great Depression in the 1930s and the aftermath of World War II, world governments predominantly favored a return to a central bank dependent on the political decision-making process. This view emerged mostly from the need to establish control over war-shattered economies; furthermore, newly independent nations opted to keep control over all aspects of their countries – a backlash against colonialism. The rise of managed economies in the Eastern Bloc was also responsible for increased government interference in the macro-economy. Eventually, however, the independence of the central bank from the government came back into fashion in Western economies and has prevailed as the optimal way to achieve a liberal and stable economic regime.

Central Banks and Deflation

Over the past quarter-century, concerns about deflation have spiked after big financial crises. Japan has offered a sobering example. After its equities and real estate bubbles burst in 1989-90, causing the Nikkei index to lose one-third of its value within a year, deflation became entrenched. The Japanese economy, which had been one of the fastest-growing in the world from the 1960s to the 1980s, slowed dramatically. The '90s became known as Japan's Lost Decade. In 2013, Japan's nominal GDP was still about 6% below its level in the mid-1990s.

The Great Recession of 2008-09 sparked fears of a similar period of prolonged deflation in the United States and elsewhere because of the catastrophic collapse in prices of a wide range of assets. The global financial system was also thrown into turmoil by the insolvency of a number of major banks and financial institutions throughout the United States and Europe, exemplified by the collapse of Lehman Brothers in September 2008.

The Federal Reserve's Approach

In response, in December 2008, the Federal Open Market Committee (FOMC), the Federal Reserve's monetary policy body, turned to two main types of unconventional monetary policy tools: (1) forward policy guidance and (2) large-scale asset purchases, aka quantitative easing (QE).

The former involved cutting the target federal funds rate essentially to zero and keeping it there at least through mid-2013. But it's the other tool, quantitative easing, that has hogged the headlines and become synonymous with the Fed's easy-money policies. QE essentially involves a central bank creating new money and using it to buy securities from the nation's banks so as to pump liquidity into the economy and drive down long-term interest rates. In this case, it allowed the Fed to purchase riskier assets, including mortgage-backed securities and other non-government debt.

This ripples through to other interest rates across the economy and the broad decline in interest rates stimulate demand for loans from consumers and businesses. Banks are able to meet this higher demand for loans because of the funds they have received from the central bank in exchange for their securities holdings.

Other Deflation-Fighting Measures

In January 2015, the European Central Bank (ECB) embarked on its own version of QE, by pledging to buy at least 1.1 trillion euros' worth of bonds, at a monthly pace of 60 billion euros, through to September 2016. The ECB launched its QE program six years after the Federal Reserve did so, in a bid to support the fragile recovery in Europe and ward off deflation, after its unprecedented move to cut the benchmark lending rate below 0% in late-2014 met with only limited success.

While the ECB was the first major central bank to experiment with negative interest rates, a number of central banks in Europe, including those of Sweden, Denmark, and Switzerland, have pushed their benchmark interest rates below the zero bound.

Results of Deflation-Fighting Efforts

The measures taken by central banks seem to be winning the battle against deflation, but it is too early to tell if they have won the war. Meanwhile, the concerted moves to fend off deflation globally have had some strange consequences: 

  • QE could lead to a covert currency war: QE programs have led to major currencies plunging across the board against the U.S. dollar. With most nations having exhausted almost all their options to stimulate growth, currency depreciation may be the only tool remaining to boost economic growth, which could lead to a covert currency war.
  • European bond yields have turned negative: More than a quarter of debt issued by European governments, or an estimated $1.5 trillion, currently has negative yields. This may be a result of the ECB's bond-buying program, but it could also be signaling a sharp economic slowdown in the future.
  • Central bank balance sheets are bloating: Large-scale asset purchases by the Federal Reserve, Bank of Japan, and the ECB are swelling balance sheets to record levels. Shrinking these central bank balance sheets may have negative consequences down the road.

In Japan and Europe, the central bank purchases included more than various non-government debt securities. These two banks actively engaged in direct purchases of corporate stock in order to prop up equity markets, making the BoJ the largest equity holder of a number of companies including Kikkoman, the largest soy-sauce producer in the country, indirectly via large positions in exchange-traded funds (ETFs).

Modern Central Bank Issues

Currently, the Federal Reserve, the European Central Bank, and other major central banks are under pressure to reduce the balance sheets that ballooned during their recessionary buying spree (the top 10 central banks have expanded their holdings by 265% over the past decade).

Unwinding, or tapering these enormous positions is likely to spook the market since a flood of supply is likely to keep demand at bay. Moreover, in some more illiquid markets, such as the MBS market, central banks became the single largest buyer. In the U.S., for example, with the Fed no longer purchasing and under pressure to sell, it is unclear if there are enough buyers at fair prices to take these assets off the Fed's hands. The fear is that prices will then collapse in these markets, creating more widespread panic. If mortgage bonds fall in value, the other implication is that the interest rates associated with these assets will rise, putting upward pressure on mortgage rates in the market and putting a damper on the long and slow housing recovery.

One strategy that can calm fears is for the central banks to let certain bonds mature and to refrain from buying new ones, rather than outright selling. But even with phasing out purchases, the resilience of markets is unclear, since central banks have been such large and consistent buyers for nearly a decade.

Источник: https://www.investopedia.com/terms/c/centralbank.asp
next page > 3 reviews. Found inside – Page 136Cecchetti , S. G. ( 1997 ) ' Measuring Short - Run Inflation For Central Bankers ' , Economic Review of the Federal Reserve Bank of St. Louis , 79 , pp . Banks near me ; Find Find » Banks in Missouri » Banks in City of Saint Louis » Banks in Saint Louis CENTRAL BANK OF ST. LOUIS Locations CENTRAL BANK OF ST. LOUIS ATMs CENTRAL BANK OF ST. LOUIS - Ladue Branch Address: 9645 Clayton Road .

Federal Reserve

Central banking system of the United States

"The Fed" redirects here. For the Welsh trade union, see South Wales Miners' Federation. For other uses, see The Fed (disambiguation).

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]

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]


The primary declared motivation for creating the Federal Reserve System was to address banking panics.[6] Other purposes are stated in the Federal Reserve Act, such as "to furnish an elastic currency, to afford means of rediscounting commercial paper, to establish a more effective supervision of banking in the United States, and for other purposes".[26] Before the founding of the Federal Reserve System, the United States underwent several financial crises. A particularly severe crisis in 1907 led Congress to enact the Federal Reserve Act in 1913. Today the Federal Reserve System has responsibilities in addition to stabilizing the financial system.[27]

Current functions of the Federal Reserve System include:[15][27]

  • To address the problem of banking panics
  • To serve as the central bank for the United States
  • To strike a balance between private interests of banks and the centralized responsibility of government
    • To supervise and regulate banking institutions
    • To protect the credit rights of consumers
  • To manage the nation's money supply through monetary policy to achieve the sometimes-conflicting goals of
  • To maintain the stability of the financial system and contain systemic risk in financial markets
  • To provide financial services to depository institutions, the U.S. government, and foreign official institutions, including playing a major role in operating the nation's payments system
    • To facilitate the exchange of payments among regions
    • To respond to local liquidity needs
  • To strengthen U.S. standing in the world economy

Addressing the problem of bank panics[edit]

Further information: Bank run and Fractional-reserve banking

Banking institutions in the United States are required to hold reserves‍—‌amounts of currency and deposits in other banks‍—‌equal to only a fraction of the amount of the bank's deposit liabilities owed to customers. This practice is called fractional-reserve banking. As a result, banks usually invest the majority of the funds received from depositors. On rare occasions, too many of the bank's customers will withdraw their savings and the bank will need help from another institution to continue operating; this is called a bank run. Bank runs can lead to a multitude of social and economic problems. The Federal Reserve System was designed as an attempt to prevent or minimize the occurrence of bank runs, and possibly act as a lender of last resort when a bank run does occur. Many economists, following Nobel laureate Milton Friedman, believe that the Federal Reserve inappropriately refused to lend money to small banks during the bank runs of 1929; Friedman argued that this contributed to the Great Depression.[29][30][31]

Check clearing system[edit]

Because some banks refused to clear checks from certain other banks during times of economic uncertainty, a check-clearing system was created in the Federal Reserve System. It is briefly described in The Federal Reserve System‍—‌Purposes and Functions as follows:[32]

By creating the Federal Reserve System, Congress intended to eliminate the severe financial crises that had periodically swept the nation, especially the sort of financial panic that occurred in 1907. During that episode, payments were disrupted throughout the country because many banks and clearinghouses refused to clear checks drawn on certain other banks, a practice that contributed to the failure of otherwise solvent banks. To address these problems, Congress gave the Federal Reserve System the authority to establish a nationwide check-clearing system. The System, then, was to provide not only an elastic currency‍—‌that is, a currency that would expand or shrink in amount as economic conditions warranted‍—‌but also an efficient and equitable check-collection system.

Lender of last resort[edit]

In the United States, the Federal Reserve serves as the lender of last resort to those institutions that cannot obtain credit elsewhere and the collapse of which would have serious implications for the economy. It took over this role from the private sector "clearing houses" which operated during the Free Banking Era; whether public or private, the availability of liquidity was intended to prevent bank runs.[33][34]


Through its discount window and credit operations, Reserve Banks provide liquidity to banks to meet short-term needs stemming from seasonal fluctuations in deposits or unexpected withdrawals. Longer-term liquidity may also be provided in exceptional circumstances. The rate the Fed charges banks for these loans is called the discount rate (officially the primary credit rate).

By making these loans, the Fed serves as a buffer against unexpected day-to-day fluctuations in reserve demand and supply. This contributes to the effective functioning of the banking system, alleviates pressure in the reserves market and reduces the extent of unexpected movements in the interest rates.[35] For example, on September 16, 2008, the Federal Reserve Board authorized an $85 billion loan to stave off the bankruptcy of international insurance giant American International Group (AIG).[36][37]

Central bank[edit]

Further information: Central bank

Obverse of a Federal Reserve $1 noteissued in 2009

In its role as the central bank of the United States, the Fed serves as a banker's bank and as the government's bank. As the banker's bank, it helps to assure the safety and efficiency of the payments system. As the government's bank or fiscal agent, the Fed processes a variety of financial transactions involving trillions of dollars. Just as an individual might keep an account at a bank, the U.S. Treasury keeps a checking account with the Federal Reserve, through which incoming federal tax deposits and outgoing government payments are handled. As part of this service relationship, the Fed sells and redeems U.S. government securities such as savings bonds and Treasury bills, notes and bonds. It also issues the nation's coin and paper currency. The U.S. Treasury, through its Bureau of the Mint and Bureau of Engraving and Printing, actually produces the nation's cash supply and, in effect, sells the paper currency to the Federal Reserve Banks at manufacturing cost, and the coins at face value. The Federal Reserve Banks then distribute it to other financial institutions in various ways.[38] During the Fiscal Year 2013, the Bureau of Engraving and Printing delivered 6.6 billion notes at an average cost of 5.0 cents per note.[39][40]

Federal funds[edit]

Main article: Federal funds

Federal funds are the reserve balances (also called Federal Reserve Deposits) that private banks keep at their local Federal Reserve Bank.[41][42] These balances are the namesake reserves of the Federal Reserve System. The purpose of keeping funds at a Federal Reserve Bank is to have a mechanism for private banks to lend funds to one another. This market for funds plays an important role in the Federal Reserve System as it is what inspired the name of the system and it is what is used as the basis for monetary policy. Monetary policy is put into effect partly by influencing how much interest the private banks charge each other for the lending of these funds.

Federal reserve accounts contain federal reserve credit, which can be converted into federal reserve notes. Private banks maintain their bank reserves in federal reserve accounts.

Bank regulation[edit]

The Federal Reserve regulates private banks. The system was designed out of a compromise between the competing philosophies of privatization and government regulation. In 2006 Donald L. Kohn, vice chairman of the board of governors, summarized the history of this compromise:[43]

Agrarian and progressive interests, led by William Jennings Bryan, favored a central bank under public, rather than banker, control. But the vast majority of the nation's bankers, concerned about government intervention in the banking business, opposed a central bank structure directed by political appointees. The legislation that Congress ultimately adopted in 1913 reflected a hard-fought battle to balance these two competing views and created the hybrid public-private, centralized-decentralized structure that we have today.

The balance between private interests and government can also be seen in the structure of the system. Private banks elect members of the board of directors at their regional Federal Reserve Bank while the members of the board of governors are selected by the President of the United States and confirmed by the Senate.

Government regulation and supervision[edit]

The Federal Banking Agency Audit Act, enacted in 1978 as Public Law 95-320 and 31 U.S.C. section 714 establish that the board of governors of the Federal Reserve System and the Federal Reserve banks may be audited by the Government Accountability Office (GAO).[44]

The GAO has authority to audit check-processing, currency storage and shipments, and some regulatory and bank examination functions, however, there are restrictions to what the GAO may audit. Under the Federal Banking Agency Audit Act, 31 U.S.C. section 714(b), audits of the Federal Reserve Board and Federal Reserve banks do not include (1) transactions for or with a foreign central bank or government or non-private international financing organization; (2) deliberations, decisions, or actions on monetary policy matters; (3) transactions made under the direction of the Federal Open Market Committee; or (4) a part of a discussion or communication among or between members of the board of governors and officers and employees of the Federal Reserve System related to items (1), (2), or (3). See Federal Reserve System Audits: Restrictions on GAO's Access (GAO/T-GGD-94-44), statement of Charles A. Bowsher.[45]

The board of governors in the Federal Reserve System has a number of supervisory and regulatory responsibilities in the U.S. banking system, but not complete responsibility. A general description of the types of regulation and supervision involved in the U.S. banking system is given by the Federal Reserve:[46]

The Board also plays a major role in the supervision and regulation of the U.S. banking system. It has supervisory responsibilities for state-chartered banks[47] that are members of the Federal Reserve System, bank holding companies (companies that control banks), the foreign activities of member banks, the U.S. activities of foreign banks, and Edge Act and "agreement corporations" (limited-purpose institutions that engage in a foreign banking business). The Board and, under delegated authority, the Federal Reserve Banks, supervise approximately 900 state member banks and 5,000 bank holding companies. Other federal agencies also serve as the primary federal supervisors of commercial banks; the Office of the Comptroller of the Currency supervises national banks, and the Federal Deposit Insurance Corporation supervises state banks that are not members of the Federal Reserve System.

Some regulations issued by the Board apply to the entire banking industry, whereas others apply only to member banks, that is, state banks that have chosen to join the Federal Reserve System and national banks, which by law must be members of the System. The Board also issues regulations to carry out major federal laws governing consumer credit protection, such as the Truth in Lending, Equal Credit Opportunity, and Home Mortgage Disclosure Acts. Many of these consumer protection regulations apply to various lenders outside the banking industry as well as to banks.

Members of the Board of Governors are in continual contact with other policy makers in government. They frequently testify before congressional committees on the economy, monetary policy, banking supervision and regulation, consumer credit protection, financial markets, and other matters.

The Board has regular contact with members of the President's Council of Economic Advisers and other key economic officials. The Chair also meets from time to time with the President of the United States and has regular meetings with the Secretary of the Treasury. The Chair has formal responsibilities in the international arena as well.

There is a very strong economic consensus in favor of independence from political influence.[48]

Regulatory and oversight responsibilities[edit]

The board of directors of each Federal Reserve Bank District also has regulatory and supervisory responsibilities. If the board of directors of a district bank has judged that a member bank is performing or behaving poorly, it will report this to the board of governors. This policy is described in United States Code:[49]

Each Federal reserve bank shall keep itself informed of the general character and amount of the loans and investments of its member banks with a view to ascertaining whether undue use is being made of bank credit for the speculative carrying of or trading in securities, real estate, or commodities, or for any other purpose inconsistent with the maintenance of sound credit conditions; and, in determining whether to grant or refuse advances, rediscounts, or other credit accommodations, the Federal reserve bank shall give consideration to such information. The chairman of the Federal reserve bank shall report to the Board of Governors of the Federal Reserve System any such undue use of bank credit by any member bank, together with his recommendation. Whenever, in the judgment of the Board of Governors of the Federal Reserve System, any member bank is making such undue use of bank credit, the Board may, in its discretion, after reasonable notice and an opportunity for a hearing, suspend such bank from the use of the credit facilities of the Federal Reserve System and may terminate such suspension or may renew it from time to time.

National payments system[edit]

The Federal Reserve plays a role in the U.S. payments system. The twelve Federal Reserve Banks provide banking services to depository institutions and to the federal government. For depository institutions, they maintain accounts and provide various payment services, including collecting checks, electronically transferring funds, and distributing and receiving currency and coin. For the federal government, the Reserve Banks act as fiscal agents, paying Treasury checks; processing electronic payments; and issuing, transferring, and redeeming U.S. government securities.[50]

In the Depository Institutions Deregulation and Monetary Control Act of 1980, Congress reaffirmed that the Federal Reserve should promote an efficient nationwide payments system. The act subjects all depository institutions, not just member commercial banks, to reserve requirements and grants them equal access to Reserve Bank payment services. The Federal Reserve plays a role in the nation's retail and wholesale payments systems by providing financial services to depository institutions. Retail payments are generally for relatively small-dollar amounts and often involve a depository institution's retail clients‍—‌individuals and smaller businesses. The Reserve Banks' retail services include distributing currency and coin, collecting checks, and electronically transferring funds through the automated clearinghouse system. By contrast, wholesale payments are generally for large-dollar amounts and often involve a depository institution's large corporate customers or counterparties, including other financial institutions. The Reserve Banks' wholesale services include electronically transferring funds through the Fedwire Funds Service and transferring securities issued by the U.S. government, its agencies, and certain other entities through the Fedwire Securities Service.


Main article: Structure of the Federal Reserve System

Organization of the Federal Reserve System

The Federal Reserve System has a "unique structure that is both public and private"[51] and is described as "independent within the government" rather than "independent of government".[52] The System does not require public funding, and derives its authority and purpose from the Federal Reserve Act, which was passed by Congress in 1913 and is subject to Congressional modification or repeal.[53] The four main components of the Federal Reserve System are (1) the board of governors, (2) the Federal Open Market Committee, (3) the twelve regional Federal Reserve Banks, and (4) the member banks throughout the country.

District #LetterFederal Reserve BankBranchesWebsitePresident
1ABostonhttps://www.bostonfed.orgEric S. Rosengren
2BNew York Cityhttp://www.newyorkfed.orgJohn C. Williams
3CPhiladelphiahttp://www.philadelphiafed.orgPatrick T. Harker
4DClevelandCincinnati, Ohio
Pittsburgh, Pennsylvania
http://www.clevelandfed.orgLoretta J. Mester
5ERichmondBaltimore, Maryland
Charlotte, North Carolina
http://www.richmondfed.orgThomas Barkin
6FAtlantaBirmingham, Alabama
Jacksonville, Florida
Miami, Florida
Nashville, Tennessee
New Orleans, Louisiana
http://www.frbatlanta.orgRaphael Bostic
7GChicagoDetroit, Michiganhttp://www.chicagofed.orgCharles L. Evans
8HSt. LouisLittle Rock, Arkansas
Louisville, Kentucky
Memphis, Tennessee
http://www.stlouisfed.orgJames B. Bullard
9IMinneapolisHelena, Montanahttps://www.minneapolisfed.orgNeel Kashkari
10JKansas CityDenver, Colorado
Oklahoma City, Oklahoma
Omaha, Nebraska
http://www.kansascityfed.orgEsther George
11KDallasEl Paso, Texas
Houston, Texas
San Antonio, Texas
http://www.dallasfed.orgRobert Steven Kaplan
12LSan FranciscoLos Angeles, California
Portland, Oregon
Salt Lake City, Utah
Seattle, Washington
http://www.frbsf.orgMary C. Daly

Board of governors[edit]

Main article: Federal Reserve Board of Governors

The seven-member board of governors is a large federal agency that functions in business oversight by examining national banks.[54]: 12, 15  It is charged with the overseeing of the 12 District Reserve Banks and setting national monetary policy. It also supervises and regulates the U.S. banking system in general.[55] Governors are appointed by the President of the United States and confirmed by the Senate for staggered 14-year terms.[35] One term begins every two years, on February 1 of even-numbered years, and members serving a full term cannot be renominated for a second term.[56] "[U]pon the expiration of their terms of office, members of the Board shall continue to serve until their successors are appointed and have qualified." The law provides for the removal of a member of the board by the president "for cause".[57] The board is required to make an annual report of operations to the Speaker of the U.S. House of Representatives.

The chair and vice chair of the board of governors are appointed by the president from among the sitting governors. They both serve a four-year term and they can be renominated as many times as the president chooses, until their terms on the board of governors expire.[58]

List of members of the board of governors[edit]

Board of governors in April 2019, when two of the seven seats were vacant

The current members of the board of governors are as follows:[56]

Portrait Governor Party Term start Term expires
Jerome H. Powell (cropped).jpgJay Powell
RepublicanFebruary 5, 2018 (as Chair) February 5, 2022 (as Chair)
May 25, 2012 (as Governor)
June 16, 2014 (reappointment)
January 31, 2028 (as Governor)
Richard Clarida official photo (cropped).jpgRichard Clarida
(Vice Chair)
RepublicanSeptember 17, 2018 (as Vice Chair) September 17, 2022 (as Vice Chair)
September 17, 2018 (as Governor) January 31, 2022 (as Governor)
Lael Brainard cropped.jpgLael BrainardDemocraticJune 16, 2014January 31, 2026
Randal Quarles official photo (cropped).jpgRandy QuarlesRepublicanOctober 13, 2017
July 17, 2018 (reappointment)
January 31, 2032
Michelle Bowman (cropped).jpgMiki BowmanRepublicanNovember 26, 2018
February 1, 2020 (reappointment)
January 31, 2034
Christopher Waller.jpgChris WallerRepublicanDecember 18, 2020January 31, 2030
VacantJanuary 31, 2024

Nominations, confirmations and resignations[edit]

In late December 2011, President Barack Obama nominated Jeremy C. Stein, a Harvard University finance professor and a Democrat, and Jerome Powell, formerly of Dillon Read, Bankers Trust[59] and The Carlyle Group[60] and a Republican. Both candidates also have Treasury Department experience in the Obama and George H. W. Bush administrations respectively.[59]

"Obama administration officials [had] regrouped to identify Fed candidates after Peter Diamond, a Nobel Prize-winning economist, withdrew his nomination to the board in June [2011] in the face of Republican opposition. Richard Clarida, a potential nominee who was a Treasury official under George W. Bush, pulled out of consideration in August [2011]", one account of the December nominations noted.[61] The two other Obama nominees in 2011, Janet Yellen and Sarah Bloom Raskin,[62] were confirmed in September.[63] One of the vacancies was created in 2011 with the resignation of Kevin Warsh, who took office in 2006 to fill the unexpired term ending January 31, 2018, and resigned his position effective March 31, 2011.[64][65] In March 2012, U.S. Senator David Vitter (R, LA) said he would oppose Obama's Stein and Powell nominations, dampening near-term hopes for approval.[66] However, Senate leaders reached a deal, paving the way for affirmative votes on the two nominees in May 2012 and bringing the board to full strength for the first time since 2006[67] with Duke's service after term end. Later, on January 6, 2014, the United States Senate confirmed Yellen's nomination to be chair of the Federal Reserve Board of Governors; she was the first woman to hold the position.[68] Subsequently, President Obama nominated Stanley Fischer to replace Yellen as the Vice Chair.[69]

In April 2014, Stein announced he was leaving to return to Harvard May 28 with four years remaining on his term. At the time of the announcement, the FOMC "already is down three members as it awaits the Senate confirmation of ... Fischer and Lael Brainard, and as [President] Obama has yet to name a replacement for ... Duke. ... Powell is still serving as he awaits his confirmation for a second term."[70]

Allan R. Landon, former president and CEO of the Bank of Hawaii, was nominated in early 2015 by President Obama to the board.[71]

In July 2015, President Obama nominated University of Michigan economist Kathryn M. Dominguez to fill the second vacancy on the board. The Senate had not yet acted on Landon's confirmation by the time of the second nomination.[72]

Daniel Tarullo submitted his resignation from the board on February 10, 2017, effective on or around April 5, 2017.[73]

Federal Open Market Committee[edit]

Main article: Federal Open Market Committee

The Federal Open Market Committee (FOMC) consists of 12 members, seven from the board of governors and 5 of the regional Federal Reserve Bank presidents. The FOMC oversees and sets policy on open market operations, the principal tool of national monetary policy. These operations affect the amount of Federal Reserve balances available to depository institutions, thereby influencing overall monetary and credit conditions. The FOMC also directs operations undertaken by the Federal Reserve in foreign exchange markets. The FOMC must reach consensus on all decisions. The president of the Federal Reserve Bank of New York is a permanent member of the FOMC; the presidents of the other banks rotate membership at two- and three-year intervals. All Regional Reserve Bank presidents contribute to the committee's assessment of the economy and of policy options, but only the five presidents who are then members of the FOMC vote on policy decisions. The FOMC determines its own internal organization and, by tradition, elects the chair of the board of governors as its chair and the president of the Federal Reserve Bank of New York as its vice chair. Formal meetings typically are held eight times each year in Washington, D.C. Nonvoting Reserve Bank presidents also participate in Committee deliberations and discussion. The FOMC generally meets eight times a year in telephone consultations and other meetings are held when needed.[74]

There is very strong consensus among economists against politicising the FOMC.[48]

Federal Advisory Council[edit]

Main article: Federal Advisory Council

The Federal Advisory Council, composed of twelve representatives of the banking industry, advises the board on all matters within its jurisdiction.

Federal Reserve Banks[edit]

Main article: Federal Reserve Bank

Map of the 12 Federal Reserve Districts, with the 12 Federal Reserve Banks marked as black squares, and all Branches within each district (24 total) marked as red circles. The Washington, DC, headquarters is marked with a star. (Also, a 25th branch in Buffalo, NY, was closed in 2008.)
The 12 Reserve Banks buildings in 1936

There are 12 Federal Reserve Banks, each of which is responsible for member banks located in its district. They are located in Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas, and San Francisco. The size of each district was set based upon the population distribution of the United States when the Federal Reserve Act was passed.

The charter and organization of each Federal Reserve Bank is established by law and cannot be altered by the member banks. Member banks do, however, elect six of the nine members of the Federal Reserve Banks' boards of directors.[35][75]

Each regional Bank has a president, who is the chief executive officer of their Bank. Each regional Reserve Bank's president is nominated by their Bank's board of directors, but the nomination is contingent upon approval by the board of governors. Presidents serve five-year terms and may be reappointed.[76]

Each regional Bank's board consists of nine members. Members are broken down into three classes: A, B, and C. There are three board members in each class. Class A members are chosen by the regional Bank's shareholders, and are intended to represent member banks' interests. Member banks are divided into three categories: large, medium, and small. Each category elects one of the three class A board members. Class B board members are also nominated by the region's member banks, but class B board members are supposed to represent the interests of the public. Lastly, class C board members are appointed by the board of governors, and are also intended to represent the interests of the public.[77]

Legal status of regional Federal Reserve Banks[edit]

The Federal Reserve Banks have an intermediate legal status, with some features of private corporations and some features of public federal agencies. The United States has an interest in the Federal Reserve Banks as tax-exempt federally created instrumentalities whose profits belong to the federal government, but this interest is not proprietary.[78] In Lewis v. United States,[79] the United States Court of Appeals for the Ninth Circuit stated that: "The Reserve Banks are not federal instrumentalities for purposes of the FTCA [the Federal Tort Claims Act], but are independent, privately owned and locally controlled corporations." The opinion went on to say, however, that: "The Reserve Banks have properly been held to be federal instrumentalities for some purposes." Another relevant decision is Scott v. Federal Reserve Bank of Kansas City,[78] in which the distinction is made between Federal Reserve Banks, which are federally created instrumentalities, and the board of governors, which is a federal agency.

Regarding the structural relationship between the twelve Federal Reserve banks and the various commercial (member) banks, political science professor Michael D. Reagan has written:[80]

... the "ownership" of the Reserve Banks by the commercial banks is symbolic; they do not exercise the proprietary control associated with the concept of ownership nor share, beyond the statutory dividend, in Reserve Bank "profits." ... Bank ownership and election at the base are therefore devoid of substantive significance, despite the superficial appearance of private bank control that the formal arrangement creates.

Plaque marking a bank as a member

Member banks[edit]

A member bank is a private institution and owns stock in its regional Federal Reserve Bank. All nationally chartered banks hold stock in one of the Federal Reserve Banks. State chartered banks may choose to be members (and hold stock in their regional Federal Reserve bank) upon meeting certain standards.

The amount of stock a member bank must own is equal to 3% of its combined capital and surplus.[81][82] However, holding stock in a Federal Reserve bank is not like owning stock in a publicly traded company. These stocks cannot be sold or traded, and member banks do not control the Federal Reserve Bank as a result of owning this stock. From their Regional Bank, member banks with $10 billion or less in assets receive a dividend of 6%, while member banks with more than $10 billion in assets receive the lesser of 6% or the current 10-year Treasury auction rate.[83] The remainder of the regional Federal Reserve Banks' profits is given over to the United States Treasury Department. In 2015, the Federal Reserve Banks made a profit of $100.2 billion and distributed $2.5 billion in dividends to member banks as well as returning $97.7 billion to the U.S. Treasury.[24]

About 38% of U.S. banks are members of their regional Federal Reserve Bank.[84][85]


An external auditor selected by the audit committee of the Federal Reserve System regularly audits the Board of Governors and the Federal Reserve Banks. The GAO will audit some activities of the Board of Governors. These audits do not cover "most of the Fed's monetary policy actions or decisions, including discount window lending (direct loans to financial institutions), open-market operations and any other transactions made under the direction of the Federal Open Market Committee" ...[nor may the GAO audit] "dealings with foreign governments and other central banks."[86]

The annual and quarterly financial statements prepared by the Federal Reserve System conform to a basis of accounting that is set by the Federal Reserve Board and does not conform to Generally Accepted Accounting Principles (GAAP) or government Cost Accounting Standards (CAS). The financial reporting standards are defined in the Financial Accounting Manual for the Federal Reserve Banks.[87] The cost accounting standards are defined in the Planning and Control System Manual.[87] As of 27 August 2012[update], the Federal Reserve Board has been publishing unaudited financial reports for the Federal Reserve banks every quarter.[88]

November 7, 2008, Bloomberg L.P. News brought a lawsuit against the board of governors of the Federal Reserve System to force the board to reveal the identities of firms for which it has provided guarantees during the financial crisis of 2007–2008.[89] Bloomberg, L.P. won at the trial court[90] and the Fed's appeals were rejected at both the United States Court of Appeals for the Second Circuit and the U.S. Supreme Court. The data was released on March 31, 2011.[91][92]

Monetary policy[edit]

Further information: Monetary policy of the United States

The term "monetary policy" refers to the actions undertaken by a central bank, such as the Federal Reserve, to influence the availability and cost of money and credit to help promote national economic goals. What happens to money and credit affects interest rates (the cost of credit) and the performance of an economy. The Federal Reserve Act of 1913 gave the Federal Reserve authority to set monetary policy in the United States.[93][94]

Interbank lending[edit]

The Federal Reserve sets monetary policy by influencing the federal funds rate, which is the rate of interbank lending of excess reserves. The rate that banks charge each other for these loans is determined in the interbank market and the Federal Reserve influences this rate through the three "tools" of monetary policy described in the Tools section below. The federal funds rate is a short-term interest rate that the FOMC focuses on, which affects the longer-term interest rates throughout the economy. The Federal Reserve summarized its monetary policy in 2005:

The Federal Reserve implements U.S. monetary policy by affecting conditions in the market for balances that depository institutions hold at the Federal Reserve Banks...By conducting open market operations, imposing reserve requirements, permitting depository institutions to hold contractual clearing balances, and extending credit through its discount window facility, the Federal Reserve exercises considerable control over the demand for and supply of Federal Reserve balances and the federal funds rate. Through its control of the federal funds rate, the Federal Reserve is able to foster financial and monetary conditions consistent with its monetary policy objectives.[95]

Effects on the quantity of reserves that banks used to make loans influence the economy. Policy actions that add reserves to the banking system encourage lending at lower interest rates thus stimulating growth in money, credit, and the economy. Policy actions that absorb reserves work in the opposite direction. The Fed's task is to supply enough reserves to support an adequate amount of money and credit, avoiding the excesses that result in inflation and the shortages that stifle economic growth.[96]


There are three main tools of monetary policy that the Federal Reserve uses to influence the amount of reserves in private banks:[93]

Tool Description
Open market operationsPurchases and sales of U.S. Treasury and federal agency securities‍—‌the Federal Reserve's principal tool for implementing monetary policy. The Federal Reserve's objective for open market operations has varied over the years. During the 1980s, the focus gradually shifted toward attaining a specified level of the federal funds rate (the rate that banks charge each other for overnight loans of federal funds, which are the reserves held by banks at the Fed), a process that was largely complete by the end of the decade.[97]
Discount rate The interest rate charged to commercial banks and other depository institutions on loans they receive from their regional Federal Reserve Bank's lending facility‍—‌the discount window.[98]
Reserve requirementsThe amount of funds that a depository institution must hold in reserve against specified deposit liabilities.[99]

Federal funds rate and open market operations[edit]

Further information: Open market operations, money creation, and federal funds rate

Federal funds rate history and recessions.png

The Federal Reserve System implements monetary policy largely by targeting the federal funds rate. This is the interest rate that banks charge each other for overnight loans of federal funds, which are the reserves held by banks at the Fed. This rate is actually determined by the market and is not explicitly mandated by the Fed. The Fed therefore tries to align the effective federal funds rate with the targeted rate by adding or subtracting from the money supply through open market operations. The Federal Reserve System usually adjusts the federal funds rate target by 0.25% or 0.50% at a time.

Open market operations allow the Federal Reserve to increase or decrease the amount of money in the banking system as necessary to balance the Federal Reserve's dual mandates. Open market operations are done through the sale and purchase of United States Treasury security, sometimes called "Treasury bills" or more informally "T-bills" or "Treasuries". The Federal Reserve buys Treasury bills from its primary dealers. The purchase of these securities affects the federal funds rate, because primary dealers have accounts at depository institutions.[100]

The Federal Reserve education website describes open market operations as follows:[94]

Open market operations involve the buying and selling of U.S. government securities (federal agency and mortgage-backed). The term 'open market' means that the Fed doesn't decide on its own which securities dealers it will do business with on a particular day. Rather, the choice emerges from an 'open market' in which the various securities dealers that the Fed does business with‍—‌the primary dealers‍—‌compete on the basis of price. Open market operations are flexible and thus, the most frequently used tool of monetary policy.

Open market operations are the primary tool used to regulate the supply of bank reserves. This tool consists of Federal Reserve purchases and sales of financial instruments, usually securities issued by the U.S. Treasury, Federal agencies and government-sponsored enterprises. Open market operations are carried out by the Domestic Trading Desk of the Federal Reserve Bank of New York under direction from the FOMC. The transactions are undertaken with primary dealers.

The Fed's goal in trading the securities is to affect the federal funds rate, the rate at which banks borrow reserves from each other. When the Fed wants to increase reserves, it buys securities and pays for them by making a deposit to the account maintained at the Fed by the primary dealer's bank. When the Fed wants to reduce reserves, it sells securities and collects from those accounts. Most days, the Fed does not want to increase or decrease reserves permanently so it usually engages in transactions reversed within a day or two. That means that a reserve injection today could be withdrawn tomorrow morning, only to be renewed at some level several hours later. These short-term transactions are called repurchase agreements (repos)‍—‌the dealer sells the Fed a security and agrees to buy it back at a later date.

Repurchase agreements[edit]

Further information: Repurchase agreement

To smooth temporary or cyclical changes in the money supply, the desk engages in repurchase agreements (repos) with its primary dealers. Repos are essentially secured, short-term lending by the Fed. On the day of the transaction, the Fed deposits money in a primary dealer's reserve account, and receives the promised securities as collateral. When the transaction matures, the process unwinds: the Fed returns the collateral and charges the primary dealer's reserve account for the principal and accrued interest. The term of the repo (the time between settlement and maturity) can vary from 1 day (called an overnight repo) to 65 days.[101]

Discount rate[edit]

Further information: Discount window

The Federal Reserve System also directly sets the discount rate (a.k.a. the policy rate), which is the interest rate for "discount window lending", overnight loans that member banks borrow directly from the Fed. This rate is generally set at a rate close to 100 basis points above the target federal funds rate. The idea is to encourage banks to seek alternative funding before using the "discount rate" option.[102] The equivalent operation by the European Central Bank is referred to as the "marginal lending facility".[103]

Both the discount rate and the federal funds rate influence the prime rate, which is usually about 3 percentage points higher than the federal funds rate.

Reserve requirements[edit]

Another instrument of monetary policy adjustment historically employed by the Federal Reserve System was the fractional reserve requirement, also known as the required reserve ratio.[104] The required reserve ratio sets the balance that the Federal Reserve System requires a depository institution to hold in the Federal Reserve Banks,[95] which depository institutions trade in the federal funds market discussed above.[105] The required reserve ratio is set by the board of governors of the Federal Reserve System.[106] The reserve requirements have changed over time and some history of these changes is published by the Federal Reserve.[107]

As a response to the financial crisis of 2008, the Federal Reserve now makes interest payments on depository institutions' required and excess reserve balances. The payment of interest on excess reserves gives the central bank greater opportunity to address credit market conditions while maintaining the federal funds rate close to the target rate set by the FOMC.[108]

As of March 2020, the reserve ratio is zero for all banks, which means that no bank is required to hold any reserves, and hence the reserve requirement effectively does not exist.[1] The reserve requirement did not play a significant role in the post-2008 interest-on-excess-reserves regime.[109]

New facilities[edit]

In order to address problems related to the subprime mortgage crisis and United States housing bubble, several new tools have been created. The first new tool, called the Term Auction Facility, was added on December 12, 2007. It was first announced as a temporary tool[110] but there have been suggestions that this new tool may remain in place for a prolonged period of time.[111] Creation of the second new tool, called the Term Securities Lending Facility, was announced on March 11, 2008.[112] The main difference between these two facilities is that the Term Auction Facility is used to inject cash into the banking system whereas the Term Securities Lending Facility is used to inject treasury securities into the banking system.[113] Creation of the third tool, called the Primary Dealer Credit Facility (PDCF), was announced on March 16, 2008.[114] The PDCF was a fundamental change in Federal Reserve policy because now the Fed is able to lend directly to primary dealers, which was previously against Fed policy.[115] The differences between these three new facilities is described by the Federal Reserve:[116]

The Term Auction Facility program offers term funding to depository institutions via a bi-weekly auction, for fixed amounts of credit. The Term Securities Lending Facility will be an auction for a fixed amount of lending of Treasury general collateral in exchange for OMO-eligible and AAA/Aaa rated private-label residential mortgage-backed securities. The Primary Dealer Credit Facility now allows eligible primary dealers to borrow at the existing Discount Rate for up to 120 days.

Some measures taken by the Federal Reserve to address this mortgage crisis have not been used since the Great Depression.[117] The Federal Reserve gives a brief summary of these new facilities:[118]

As the economy has slowed in the last nine months and credit markets have become unstable, the Federal Reserve has taken a number of steps to help address the situation. These steps have included the use of traditional monetary policy tools at the macroeconomic level as well as measures at the level of specific markets to provide additional liquidity. The Federal Reserve's response has continued to evolve since pressure on credit markets began to surface last summer, but all these measures derive from the Fed's traditional open market operations and discount window tools by extending the term of transactions, the type of collateral, or eligible borrowers.

A fourth facility, the Term Deposit Facility, was announced December 9, 2009, and approved April 30, 2010, with an effective date of June 4, 2010.[119] The Term Deposit Facility allows Reserve Banks to offer term deposits to institutions that are eligible to receive earnings on their balances at Reserve Banks. Term deposits are intended to facilitate the implementation of monetary policy by providing a tool by which the Federal Reserve can manage the aggregate quantity of reserve balances held by depository institutions. Funds placed in term deposits are removed from the accounts of participating institutions for the life of the term deposit and thus drain reserve balances from the banking system.

Term auction facility[edit]

Further information: Term auction facility

The Term Auction Facility is a program in which the Federal Reserve auctions term funds to depository institutions.[110] The creation of this facility was announced by the Federal Reserve on December 12, 2007, and was done in conjunction with the Bank of Canada, the Bank of England, the European Central Bank, and the Swiss National Bank to address elevated pressures in short-term funding markets.[120] The reason it was created is that banks were not lending funds to one another and banks in need of funds were refusing to go to the discount window. Banks were not lending money to each other because there was a fear that the loans would not be paid back. Banks refused to go to the discount window because it is usually associated with the stigma of bank failure.[121][122][123][124] Under the Term Auction Facility, the identity of the banks in need of funds is protected in order to avoid the stigma of bank failure.[125]Foreign exchange swap lines with the European Central Bank and Swiss National Bank were opened so the banks in Europe could have access to U.S. dollars.[125] Federal Reserve Chairman Ben Bernanke briefly described this facility to the U.S. House of Representatives on January 17, 2008:

the Federal Reserve recently unveiled a term auction facility, or TAF, through which prespecified amounts of discount window credit can be auctioned to eligible borrowers. The goal of the TAF is to reduce the incentive for banks to hoard cash and increase their willingness to provide credit to households and firms...TAF auctions will continue as long as necessary to address elevated pressures in short-term funding markets, and we will continue to work closely and cooperatively with other central banks to address market strains that could hamper the achievement of our broader economic objectives.[126]

It is also described in the Term Auction Facility FAQ[110]

The TAF is a credit facility that allows a depository institution to place a bid for an advance from its local Federal Reserve Bank at an interest rate that is determined as the result of an auction. By allowing the Federal Reserve to inject term funds through a broader range of counterparties and against a broader range of collateral than open market operations, this facility could help ensure that liquidity provisions can be disseminated efficiently even when the unsecured interbank markets are under stress. In short, the TAF will auction term funds of approximately one-month maturity. All depository institutions that are judged to be in sound financial condition by their local Reserve Bank and that are eligible to borrow at the discount window are also eligible to participate in TAF auctions. All TAF credit must be fully collateralized. Depositories may pledge the broad range of collateral that is accepted for other Federal Reserve lending programs to secure TAF credit. The same collateral values and margins applicable for other Federal Reserve lending programs will also apply for the TAF.

Term securities lending facility[edit]

The Term Securities Lending Facility is a 28-day facility that will offer Treasury general collateral to the Federal Reserve Bank of New York's primary dealers in exchange for other program-eligible collateral. It is intended to promote liquidity in the financing markets for Treasury and other collateral and thus to foster the functioning of financial markets more generally.[127] Like the Term Auction Facility, the TSLF was done in conjunction with the Bank of Canada, the Bank of England, the European Central Bank, and the Swiss National Bank. The resource allows dealers to switch debt that is less liquid for U.S. government securities that are easily tradable. The currency swap lines with the European Central Bank and Swiss National Bank were increased.

Primary dealer credit facility[edit]

The Primary Dealer Credit Facility (PDCF) is an overnight loan facility that will provide funding to primary dealers in exchange for a specified range of eligible collateral and is intended to foster the functioning of financial markets more generally.[116] This new facility marks a fundamental change in Federal Reserve policy because now primary dealers can borrow directly from the Fed when this used to be prohibited.

Interest on reserves[edit]

Main article: Interest on excess reserves in the United States

As of October 2008[update], the Federal Reserve banks will pay interest on reserve balances (required and excess) held by depository institutions. The rate is set at the lowest federal funds rate during the reserve maintenance period of an institution, less 75bp.[128] As of 23 October 2008[update], the Fed has lowered the spread to a mere 35 bp.[129]

Term deposit facility[edit]

The Term Deposit Facility is a program through which the Federal Reserve Banks will offer interest-bearing term deposits to eligible institutions. By removing "excess deposits" from participating banks, the overall level of reserves available for lending is reduced, which should result in increased market interest rates, acting as a brake on economic activity and inflation. The Federal Reserve has stated that:

Term deposits will be one of several tools that the Federal Reserve could employ to drain reserves when policymakers judge that it is appropriate to begin moving to a less accommodative stance of monetary policy. The development of the TDF is a matter of prudent planning and has no implication for the near-term conduct of monetary policy.[130]

The Federal Reserve initially authorized up to five "small-value offerings are designed to ensure the effectiveness of TDF operations and to provide eligible institutions with an opportunity to gain familiarity with term deposit procedures."[131] After three of the offering auctions were successfully completed, it was announced that small-value auctions would continue on an ongoing basis.[132]

The Term Deposit Facility is essentially a tool available to reverse the efforts that have been employed to provide liquidity to the financial markets and to reduce the amount of capital available to the economy. As stated in Bloomberg News:

Policy makers led by Chairman Ben S. Bernanke are preparing for the day when they will have to start siphoning off more than $1 trillion in excess reserves from the banking system to contain inflation. The Fed is charting an eventual return to normal monetary policy, even as a weakening near-term outlook has raised the possibility it may expand its balance sheet.[133]

Chairman Ben S. Bernanke, testifying before House Committee on Financial Services, described the Term Deposit Facility and other facilities to Congress in the following terms:

Most importantly, in October 2008 the Congress gave the Federal Reserve statutory authority to pay interest on balances that banks hold at the Federal Reserve Banks. By increasing the interest rate on banks' reserves, the Federal Reserve will be able to put significant upward pressure on all short-term interest rates, as banks will not supply short-term funds to the money markets at rates significantly below what they can earn by holding reserves at the Federal Reserve Banks. Actual and prospective increases in short-term interest rates will be reflected in turn in higher longer-term interest rates and in tighter financial conditions more generally....

As an additional means of draining reserves, the Federal Reserve is also developing plans to offer to depository institutions term deposits, which are roughly analogous to certificates of deposit that the institutions offer to their customers. A proposal describing a term deposit facility was recently published in the Federal Register, and the Federal Reserve is finalizing a revised proposal in light of the public comments that have been received. After a revised proposal is reviewed by the Board, we expect to be able to conduct test transactions this spring and to have the facility available if necessary thereafter. The use of reverse repos and the deposit facility would together allow the Federal Reserve to drain hundreds of billions of dollars of reserves from the banking system quite quickly, should it choose to do so.

When these tools are used to drain reserves from the banking system, they do so by replacing bank reserves with other liabilities; the asset side and the overall size of the Federal Reserve's balance sheet remain unchanged. If necessary, as a means of applying monetary restraint, the Federal Reserve also has the option of redeeming or selling securities. The redemption or sale of securities would have the effect of reducing the size of the Federal Reserve's balance sheet as well as further reducing the quantity of reserves in the banking system. Restoring the size and composition of the balance sheet to a more normal configuration is a longer-term objective of our policies. In any case, the sequencing of steps and the combination of tools that the Federal Reserve uses as it exits from its currently very accommodative policy stance will depend on economic and financial developments and on our best judgments about how to meet the Federal Reserve's dual mandate of maximum employment and price stability.

In sum, in response to severe threats to our economy, the Federal Reserve created a series of special lending facilities to stabilize the financial system and encourage the resumption of private credit flows to American families and businesses. As market conditions and the economic outlook have improved, these programs have been terminated or are being phased out. The Federal Reserve also promoted economic recovery through sharp reductions in its target for the federal funds rate and through large-scale purchases of securities. The economy continues to require the support of accommodative monetary policies. However, we have been working to ensure that we have the tools to reverse, at the appropriate time, the currently very high degree of monetary stimulus. We have full confidence that, when the time comes, we will be ready to do so.[134]

Asset Backed Commercial Paper Money Market Mutual Fund Liquidity Facility[edit]

The Asset Backed Commercial Paper Money Market Mutual Fund Liquidity Facility (ABCPMMMFLF) was also called the AMLF. The Facility began operations on September 22, 2008, and was closed on February 1, 2010.[135]

All U.S. depository institutions, bank holding companies (parent companies or U.S. broker-dealer affiliates), or U.S. branches and agencies of foreign banks were eligible to borrow under this facility pursuant to the discretion of the FRBB.

Collateral eligible for pledge under the Facility was required to meet the following criteria:

  • was purchased by Borrower on or after September 19, 2008 from a registered investment company that held itself out as a money market mutual fund;
  • was purchased by Borrower at the Fund's acquisition cost as adjusted for amortization of premium or accretion of discount on the ABCP through the date of its purchase by Borrower;
  • was rated at the time pledged to FRBB, not lower than A1, F1, or P1 by at least two major rating agencies or, if rated by only one major rating agency, the ABCP must have been rated within the top rating category by that agency;
  • was issued by an entity organized under the laws of the United States or a political subdivision thereof under a program that was in existence on September 18, 2008; and
  • had stated maturity that did not exceed 120 days if the Borrower was a bank or 270 days for non-bank Borrowers.
Commercial Paper Funding Facility[edit]

On October 7, 2008, the Federal Reserve further expanded the collateral it will loan against to include commercial paper using the new Commercial Paper Funding Facility (CPFF). The action made the Fed a crucial source of credit for non-financial businesses in addition to commercial banks and investment firms. Fed officials said they'll buy as much of the debt as necessary to get the market functioning again. They refused to say how much that might be, but they noted that around $1.3 trillion worth of commercial paper would qualify. There was $1.61 trillion in outstanding commercial paper, seasonally adjusted, on the market as of 1 October 2008[update], according to the most recent data from the Fed. That was down from $1.70 trillion in the previous week. Since the summer of 2007, the market has shrunk from more than $2.2 trillion.[136] This program lent out a total $738 billion before it was closed. Forty-five out of 81 of the companies participating in this program were foreign firms. Research shows that Troubled Asset Relief Program (TARP) recipients were twice as likely to participate in the program than other commercial paper issuers who did not take advantage of the TARP bailout. The Fed incurred no losses from the CPFF.[137]

Quantitative policy[edit]

A little-used tool of the Federal Reserve is the quantitative policy. With that, the Federal Reserve actually buys back corporate bonds and mortgage backed securities held by banks or other financial institutions. This in effect puts money back into the financial institutions and allows them to make loans and conduct normal business. The bursting of the United States housing bubble prompted the Fed to buy mortgage-backed securities for the first time in November 2008. Over six weeks, a total of $1.25 trillion were purchased in order to stabilize the housing market, about one-fifth of all U.S. government-backed mortgages.[138]


Central banking in the United States, 1791–1913[edit]

Main article: History of central banking in the United States

The first attempt at a national currency was during the American Revolutionary War. In 1775, the Continental Congress, as well as the states, began issuing paper currency, calling the bills "Continentals".[141] The Continentals were backed only by future tax revenue, and were used to help finance the Revolutionary War. Overprinting, as well as British counterfeiting, caused the value of the Continental to diminish quickly. This experience with paper money led the United States to strip the power to issue Bills of Credit (paper money) from a draft of the new Constitution on August 16, 1787,[142] as well as banning such issuance by the various states, and limiting the states' ability to make anything but gold or silver coin legal tender on August 28.[143]

In 1791, the government granted the First Bank of the United States a charter to operate as the U.S. central bank until 1811.[144] The First Bank of the United States came to an end under President Madison when Congress refused to renew its charter. The Second Bank of the United States was established in 1816, and lost its authority to be the central bank of the U.S. twenty years later under President Jackson when its charter expired. Both banks were based upon the Bank of England.[145] Ultimately, a third national bank, known as the Federal Reserve, was established in 1913 and still exists to this day.

First Central Bank, 1791 and Second Central Bank, 1816[edit]

The first U.S. institution with central banking responsibilities was the First Bank of the United States, chartered by Congress and signed into law by President George Washington on February 25, 1791, at the urging of Alexander Hamilton. This was done despite strong opposition from Thomas Jefferson and James Madison, among numerous others. The charter was for twenty years and expired in 1811 under President Madison, when Congress refused to renew it.[146]

In 1816, however, Madison revived it in the form of the Second Bank of the United States. Years later, early renewal of the bank's charter became the primary issue in the reelection of President Andrew Jackson. After Jackson, who was opposed to the central bank, was reelected, he pulled the government's funds out of the bank. Jackson was the only President to completely pay off the national debt.[147] The bank's charter was not renewed in 1836. From 1837 to 1862, in the Free Banking Era there was no formal central bank. From 1846 to 1921, an Independent Treasury System ruled. From 1863 to 1913, a system of national banks was instituted by the 1863 National Banking Act during which series of bank panics, in 1873, 1893, and 1907 occurred.[8][9][10]

Creation of Third Central Bank, 1907–1913[edit]

Main article: History of the Federal Reserve System

The main motivation for the third central banking system came from the Panic of 1907, which caused a renewed desire among legislators, economists, and bankers for an overhaul of the monetary system.[8][9][10][148] During the last quarter of the 19th century and the beginning of the 20th century, the United States economy went through a series of financial panics.[149] According to many economists, the previous national banking system had two main weaknesses: an inelastic currency and a lack of liquidity.[149] In 1908, Congress enacted the Aldrich–Vreeland Act, which provided for an emergency currency and established the National Monetary Commission to study banking and currency reform.[150] The National Monetary Commission returned with recommendations which were repeatedly rejected by Congress. A revision crafted during a secret meeting on Jekyll Island by Senator Aldrich and representatives of the nation's top finance and industrial groups later became the basis of the Federal Reserve Act.[151][152] The House voted on December 22, 1913, with 298 voting yes to 60 voting no. The Senate voted 43–25 on December 23, 1913.[153] President Woodrow Wilson signed the bill later that day.[154]

Federal Reserve Act, 1913[edit]

Main article: Federal Reserve Act

Newspaper clipping, December 24, 1913

The head of the bipartisan National Monetary Commission was financial expert and Senate Republican leader Nelson Aldrich. Aldrich set up two commissions – one to study the American monetary system in depth and the other, headed by Aldrich himself, to study the European central banking systems and report on them.[150]

In early November 1910, Aldrich met with five well known members of the New York banking community to devise a central banking bill. Paul Warburg, an attendee of the meeting and longtime advocate of central banking in the U.S., later wrote that Aldrich was "bewildered at all that he had absorbed abroad and he was faced with the difficult task of writing a highly technical bill while being harassed by the daily grind of his parliamentary duties".[155] After ten days of deliberation, the bill, which would later be referred to as the "Aldrich Plan", was agreed upon. It had several key components, including a central bank with a Washington-based headquarters and fifteen branches located throughout the U.S. in geographically strategic locations, and a uniform elastic currency based on gold and commercial paper. Aldrich believed a central banking system with no political involvement was best, but was convinced by Warburg that a plan with no public control was not politically feasible.[155] The compromise involved representation of the public sector on the Board of Directors.[156]

Aldrich's bill met much opposition from politicians. Critics charged Aldrich of being biased due to his close ties to wealthy bankers such as J. P. Morgan and John D. Rockefeller Jr., Aldrich's son-in-law. Most Republicans favored the Aldrich Plan,[156] but it lacked enough support in Congress to pass because rural and western states viewed it as favoring the "eastern establishment".[5] In contrast, progressive Democrats favored a reserve system owned and operated by the government; they believed that public ownership of the central bank would end Wall Street's control of the American currency supply.[156] Conservative Democrats fought for a privately owned, yet decentralized, reserve system, which would still be free of Wall Street's control.[156]

The original Aldrich Plan was dealt a fatal blow in 1912, when Democrats won the White House and Congress.[155] Nonetheless, President Woodrow Wilson believed that the Aldrich plan would suffice with a few modifications. The plan became the basis for the Federal Reserve Act, which was proposed by Senator Robert Owen in May 1913. The primary difference between the two bills was the transfer of control of the Board of Directors (called the Federal Open Market Committee in the Federal Reserve Act) to the government.[5][146] The bill passed Congress on December 23, 1913,[157][158] on a mostly partisan basis, with most Democrats voting "yea" and most Republicans voting "nay".[146]

Federal Reserve era, 1913–present[edit]

Main article: History of the Federal Reserve


This section needs expansion. You can help by adding to it. (October 2015)

Key laws affecting the Federal Reserve have been:[159]

Measurement of economic variables[edit]

The Federal Reserve records and publishes large amounts of data. A few websites where data is published are at the board of governors' Economic Data and Research page,[160] the board of governors' statistical releases and historical data page,[161] and at the St. Louis Fed's FRED (Federal Reserve Economic Data) page.[162] The Federal Open Market Committee (FOMC) examines many economic indicators prior to determining monetary policy.[163]

Some criticism involves economic data compiled by the Fed. The Fed sponsors much of the monetary economics research in the U.S., and Lawrence H. White objects that this makes it less likely for researchers to publish findings challenging the status quo.[164]

Net worth of households and nonprofit organizations[edit]

Total Net Worth‍—‌Balance Sheet of Households and Nonprofit Organizations 1949–2012

The net worth of households and nonprofit organizations in the United States is published by the Federal Reserve in a report titled Flow of Funds.[165] At the end of the third quarter of fiscal year 2012, this value was $64.8 trillion. At the end of the first quarter of fiscal year 2014, this value was $95.5 trillion.[166]

Money supply[edit]

Further information: Money supply

The most common measures are named M0 (narrowest), M1, M2, and M3. In the United States they are defined by the Federal Reserve as follows:

Components of the United States money supply2.svg

The Federal Reserve stopped publishing M3 statistics in March 2006, saying that the data cost a lot to collect but did not provide significantly useful information.[167] The other three money supply measures continue to be provided in detail.

CPIvs M2money supply increases

Personal consumption expenditures price index[edit]

Further information: Personal consumption expenditures price index

The Personal consumption expenditures price index, also referred to as simply the PCE price index, is used as one measure of the value of money. It is a United States-wide indicator of the average increase in prices for all domestic personal consumption. Using a variety of data including United States Consumer Price Index and U.S. Producer Price Index prices, it is derived from the largest component of the gross domestic product in the BEA's National Income and Product Accounts, personal consumption expenditures.

One of the Fed's main roles is to maintain price stability, which means that the Fed's ability to keep a low inflation rate is a long-term measure of their success.[168] Although the Fed is not required to maintain inflation within a specific range, their long run target for the growth of the PCE price index is between 1.5 and 2 percent.[169] There has been debate among policy makers as to whether the Federal Reserve should have a specific inflation targeting policy.[170][171][172]

Inflation and the economy[edit]

Most mainstream economists favor a low, steady rate of inflation.[173] Low (as opposed to zero or negative) inflation may reduce the severity of economic recessions by enabling the labor market to adjust more quickly in a downturn, and reduce the risk that a liquidity trap prevents monetary policy from stabilizing the economy.[174] The task of keeping the rate of inflation low and stable is usually given to monetary authorities.

Unemployment rate[edit]

Further information: Unemployment rate § United States Bureau of Labor Statistics, and List of U.S. states by unemployment rate

United States unemployment rates 1975–2010 showing variance between the fifty states

One of the stated goals of monetary policy is maximum employment. The unemployment rate statistics are collected by the Bureau of Labor Statistics, and like the PCE price index are used as a barometer of the nation's economic health.


The Federal Reserve is self-funded. The vast majority (90%+) of Fed revenues come from open market operations, specifically the interest on the portfolio of Treasury securities as well as "capital gains/losses" that may arise from the buying/selling of the securities and their derivatives as part of Open Market Operations. The balance of revenues come from sales of financial services (check and electronic payment processing) and discount window loans.[175] The board of governors (Federal Reserve Board) creates a budget report once per year for Congress. There are two reports with budget information. The one that lists the complete balance statements with income and expenses, as well as the net profit or loss, is the large report simply titled, "Annual Report". It also includes data about employment throughout the system. The other report, which explains in more detail the expenses of the different aspects of the whole system, is called "Annual Report: Budget Review". These detailed comprehensive reports can be found at the board of governors' website under the section "Reports to Congress"[176]

Federal Reserve remittance payments to the treasury

Balance sheet[edit]

Federal Reserve total assets, treasury bonds, and mortgage-backed securities, 2002–2021
Total combined assets for all 12 Federal Reserve Banks, 2007–2009
Total combined liabilities for all 12 Federal Reserve Banks, 2007–2009

One of the keys to understanding the Federal Reserve is the Federal Reserve balance sheet (or balance statement). In accordance with Section 11 of the Federal Reserve Act, the board of governors of the Federal Reserve System publishes once each week the "Consolidated Statement of Condition of All Federal Reserve Banks" showing the condition of each Federal Reserve bank and a consolidated statement for all Federal Reserve banks. The board of governors requires that excess earnings of the Reserve Banks be transferred to the Treasury as interest on Federal Reserve notes.[177][178]

The Federal Reserve releases its balance sheet every Thursday.[179] Below is the balance sheet as of 8 April 2021[update] (in billions of dollars):

Gold Stock 11.04
Special Drawing Rights Certificate Acct. 5.20
Treasury Currency Outstanding (Coin) 1.46
Securities, unamortized premiums and discounts, repurchase agreements, and loans 7550.43
   Securities Held Outright 7146.06
      U.S. Treasury Securities4959.03
         Bills 326.04
         Notes and Bonds, nominal 4251.66
         Notes and Bonds, inflation-indexed 334.76
         Inflation Compensation 46.57
      Federal Agency Debt Securities2.35
      Mortgage-Backed Securities 2184.68
Unamortized premiums on securities held outright 351.11
Источник: https://en.wikipedia.org/wiki/Federal_Reserve

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