U.S. Federal Reserve System

The United States Federal Reserve System (The Fed) is a banking system that consists of 12 federal reserve banks. Each one of these banks serves the member banks in its own district. This system was created in 1913 with the enactment of the Federal Reserve Act. It is supervised by the Federal Reserve Board, and has regulatory powers over the money supply and the credit structure of the US economy.

The Federal Reserve Board is the governing body of the Federal Reserve. The seven members of the Board of Governors are appointed by the President of the United States and subject to confirmation by the U.S. Senate.

The Board of Governors sets federal policy and makes key economic decisions regarding such issues as the discount rate and reserve requirements. The chairman of the Board of Governors also serves as the chairman of the Federal Open Market Committee (FOMC). Board members serve 14 year terms.

While the Fed has more than its share of critics, there are few entities that can move the financial markets the way the Federal Reserve can. As an investor and/or trader in these markets, it is important to have a firm understanding of exactly what the Federal Reserve does and how it influences the economy.

To learn more about the Federal Reserve System click on this link to access an ebook titled "The Federal Reserve Purposes & Functions".