There are some question comes in my inbox related to Federal Reserve Bank and its related primary responsibility. I’m not sure but I think most of the question are coming from academist who are getting a related research on banking.
Here is my research on answering “which of the following is a primary responsibility of the federal reserve bank?” I took the list from various banking website. In a short word I found the answers to that question is “to collect taxes”.
History of Federal Reserve System
The Federal Reserve System was created by Congress in 1913. Theresponsibilities of the Federal Reserve include:
- Influencing the supply of money and credit;
- Regulating and supervising financial institutions;
- Serving as a banking and fiscal agent for theUnited States government; and
- Supplying payments services to thepublic through depository institutions like banks,credit unions, and savings and loans.
- Payments services include issuing, transferring and redeeming U.S. government securities, processing and clearing checks, and transferring funds.
What is Federal Reserve System Do?
Although all three roles are important in maintaining astable, growing economy, monetary policy is the most visible to many citizens. Monetary policy isthestrategic actions taken by the Federal Reserve to influence the supply of money and credit in order to foster price stability and maintain maximum sustainable economic growth. Through these actions, the Fed helps keep our national economy strong and theworld economy stable.
Districts of Regional Reserve Banks
The Federal Reserve System has 12 Districts, each served by an independently chartered regional Reserve Bank. These Banks are located in:
- Kansas City,
- New York,
- St. Louis and
- San Francisco.
- There are also 25 Branch offices within the 12 Districts.
Kansas City is the head quarters for the 10th Federal Reserve District. Our Branch offices are in Denver, Oklahoma City and Omaha.
Board of Governors (Federal Reserve Board)
The Board of Governors, also known as the Federal Reserve Board, is the national component of the Federal Reserve System. The board consists of the seven governors, appointed by the president and confirmed by the Senate.
Governors serve 14-year, staggered terms to ensure stability and continuity over time. The chairman and vice-chairman are appointed to four-year terms and may be reappointed subject to term limitations.
Among theresponsibilitiesoftheBoard ofGovernors are to guide monetary policy action, to analyze domestic and international economic and financial conditions, and to lead committees that study current issues, such as consumer bankinglaws and electronic commerce.
The Board also exercises broad supervisory control over thefinancial services industry, administers certain consumer protection regulations, and oversees thenation’s payments system. The Board oversees the activities of Reserve Banks, approving the appointments of their presidents and some members of their boards ofdirectors.
TheBoard sets reserve requirements for depository institutions and approves changes in discount rates recommended by Reserve Banks.
The Board’s most important responsibility is participating in the Federal Open Market Committee (FOMC), which conducts our nation’s monetary policy; The seven governors comprise the voting majority oftheFOMC with the other five votes coming from Reserve Bank presidents.
Board members are called to testify before Congress, and they maintain regular contact with other government organizations as well. Thechairman reports twice ayear to Congress on theFed’s monetary policy objectives, testifies on numerous other issues, and meets periodically with the Secretary of the Treasury. .
The Board funds its operations by assessing the Federal Reserve Banks rather than through Congressional appropriation. Its financial accounts are audited annually by apublic accounting firm, and these accounts are also subject to audit by the General Accounting Office.
The Board of Governors consists of seven members who are appointed to 14-year terms by the president of the United States and confirmed by the Senate. The Board conducts monetary policy, issues regulations under most federal consumer credit protection laws and has broad responsibility for theU.S. payments system and the activities ofvarious banking organizations. The Board also has general oversight over the Reserve Banks and Branches.
Federal Open Market Committee (FOMC)
The rate-setting FOMC is made up of seven Fed Governors and five of the 12 Reserve Bank presidents, who vote on a rotating basis with the exception ofthe New York Fed president, who always votes. All 12 Reserve bank presidents participate in FOMC policy deliberations whether or not they are voting members. TheFOMC meets eight times a year.
The Structure and Functions of the Federal Reserve System
The Federal Reserve System is the central bank of the United States. It was founded by Congress in 1913 to provide thenation with a safer, more flexible, and more stable monetary and financial system. Over the years, its role in banking and the economy has expanded.
Federal Reserve Bankings
A network of 12 Federal Reserve Banks and 24 branches make up the Federal Reserve System under the general oversight of the Board of Governors. Reserve Banks are the operating arms of the central bank.
Each of the 12 Reserve Bank s serves its region of the country, and all but three have other offices within their Districts to help provide services to depository institutions and the public. the Bank s are named after the locations of their headquarters – Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas and San Francisco.
The Reserve Banks, the U.S. Treasury, and, indirectly, the public. A Reserve Bank is often called a”Bank er’s Bank ,” storing currency and coin, and processing checks and electronic payments. Reserve Bank s also supervise commercial Bank s in their regions.
As the Bank for the U.S. government, Reserve Banks handle the Treasury’s payments, sell government securities and assist with the Treasury’s cash management and investment activities. Reserve Bank s conduct research on regional, national and international economic issues.
Research plays acritical role in bringing broad economic perspectives to the national policymaking arena and supports Reserve Bank presidents who all attend meetings of the FederalOpen Market Committee (FOMC).
Each Reserve Bank’s board of directors oversees the management and activities of the District Bank. Reflecting the diverse interests ofeach District, the se directors contribute local business experience, community involvement and leadership. the board imparts aprivate-sector perspective to the Reserve Bank.
Each board appoints the president and first vice president of the Reserve Bank, subject to the approval of the Board of Governors.
All member Banks hold stock in Reserve Banks and receive dividends. Unlike stockholders in a public company, Banks cannot sell or trade their Fed stock. Reserve Bank s interact directly with Bank s in their Districts through examinations and financial services and bring important regional perspectives that help the entire FederalReserve System do its job more effectively.
Approximately 38 percent of the 8,039 commercial Banks in the United States are members of the Federal Reserve System. National Banks must be members; state-chartered Banks may join if the y meet certain requirements. the member Banks are stockholders of the Reserve Bank in their District and as such, are required to hold 3 percent of their capital as stock in their Reserve Banks .
In addition to the approximately 3,000 member Banks, about 17,000 other depository institutions provide the American people checkable deposits and other Banking services. these depository institutions include non member commercial Banks, savings Banks, savings and loan associations, and credit unions. Although not formally part of the Federal Reserve System, these institutions are subject to System regulations, including Reserve requirements, and have access to System payments services.
Federal Open Market Committee
the Federal Open Market Committee, or FOMC, isthe Fed’s monetary policymaking body. It is responsible for formulation of apolicy designed to promote stable prices and economic growth. Simply put, the FOMC manages the nation’s money supply. .
The voting members of the FOMC are the Board of Governors, the president of the Federal Reserve Bank of New York and presidents offour other Reserve Banks, who serve on arotating basis. All Reserve Bank presidents participate in FOMC policy discussions. The chairman of the Board of Governors chairs the FOMC.
The FOMC typically meets eight times ayear in Washington, D.C. At each meeting, the committee discusses the outlook for the U.S. economy and monetary policy options.
The FOMC is an example of the interdependence built into the Fed’s structure. It combines the expertise of the Board of Governors and the 12 Reserve Banks. Regional input from Reserve Bank directors and advisory groups brings the private sector perspective to the FOMC and provides grassroots input for monetary policy decisions.
Three statutory advisory councils – the FederalAdvisory Council, the Consumer Advisory Council, and the Thrift Institutions Advisory Council – advise the Board on matters ofcurrent interest. the se councils, whose members are drawn from each of the 12 Federal Reserve Districts, meet two to four times ayear. the individual Reserve Bank s have advisory committees as well, including thrift institutions advisory committees, small business and agricultural advisory committees. Moreover, officials from all Reserve Bank s meet periodically in various committees.
If your are simply searching for the answer of the question related to responsibility of the Federal Reserve Bank, the answer is to collect the tax. But, I’m really recommend you to take a further research for deep knowledge related to federal reserve banking task.