Federal Reserve System

The U. S. Federal Reserve System began operations in 1914 as the nation's central bank. Through its influence on money and credit, it has become a major instrument of national economic policy. It plays a large role in the regulation of financial institutions and in international financial relations. The Federal Reserve System is composed of the Board of Governors with headquarters in Washington, D.C., the 12 regional Federal Reserve banks, located in major cities throughout the United States, and the roughly 6,000 commercial banks that are "members" of the system.

The board consists of seven persons nominated by the president of the United States, subject to Senate confirmation. Each member serves a 14-year term; one member's term expires every 2 years, on February 1 of even-numbered years. Twice a year the board must report to Congress on its activities. A member who serves a full term may not be reappointed. A member who completes an unexpired portion of a term may be reappointed. All terms end on their statutory date regardless of the date on which the member is sworn into office.

The Chairman and the Vice Chairman of the Board are named by the President from among the members and are confirmed by the Senate. They serve a term of four years. A member's term on the Board is not affected by his or her status as Chairman or Vice Chairman.

The 12 Federal Reserve banks are located in major financial centers (Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas, San Francisco). While technically private institutions that are "owned" by member banks, they act as public service institutions. All deposit institutions must hold reserves (as a proportion of their checking deposits) either on deposit with Federal Reserve banks or in currency. Reserve deposits with Federal Reserve banks serve as a medium for a national check-clearing system. The Federal Reserve banks can make loans to deposit institutions. They manage financial transactions for the U.S. Treasury and for foreign and international financial institutions. They put new currency into circulation, chiefly to replace worn-out specimens; Federal Reserve notes constitute the nation's paper currency. Each reserve bank has a staff of bank examiners who conduct on-the-spot inspections of the institutions under their jurisdiction.

The most important activities of the Federal Reserve are those that determine the speed with which the nation's money supply (currency and deposits) increases. Each deposit institution's loans and deposits are limited by its reserves, and the volume of reserves is determined by Federal Reserve actions, chiefly through open-market operations. In these operations the Federal Reserve Bank of New York buys or sells U.S. securities, foreign currencies, or other assets in transactions with banks and the public. When the Federal Reserve buys assets, it pays with a check drawn on itself and can create the funds to pay the check. If the purchases are insufficient, the economy may suffer from a lack of cash or credit. If the purchases are excessive, the money supply grows too rapidly, driving up inflation and interest rates.

The Federal Reserve has wide regulatory duties. It supervises state-chartered member banks, U.S. branches of foreign banks, and bank holding companies. The board regulates the establishment of bank branches, trust operations, and bank mergers. It sets minimum margin requirements for stock market lending, can determine the required ratio of reserves to deposits, and can vary the interest rates charged on loans to deposit institutions. The Federal Reserve also regulates consumer protection activities. Reserve authorities cooperate closely with foreign central banks and international organizations such as the International Monetary Fund and the World Bank.

Members of the Board

Ben S. Bernanke — Chairman. Ben S. Bernanke was sworn in on February 1, 2006, as Chairman and a member of the Board of Governors of the Federal Reserve System. Dr. Bernanke also serves as Chairman of the Federal Open Market Committee, the System's principal monetary policymaking body. He was appointed as a member of the Board to a full 14-year term, which expires January 31, 2020, and to a four-year term as Chairman, which expires January 31, 2010. Before his appointment as Chairman, Dr. Bernanke was Chairman of the President's Council of Economic Advisers, from June 2005 to January 2006.
Dr. Bernanke was born in December 1953 in Augusta, Georgia, and grew up in Dillon, South Carolina. He received a B.A. in economics in 1975 from Harvard University (summa cum laude) and a Ph.D. in economics in 1979 from the Massachusetts Institute of Technology.
Dr. Bernanke is married and has two children.

Donald L. Kohn — Vice Chairman. Donald L. Kohn originally took office on August 5, 2002, as a member of the Board of Governors of the Federal Reserve System for a full term ending January 31, 2016. On June 23, 2006, Dr. Kohn was sworn in as Vice Chairman of the Board of Governors of the Federal Reserve System for a four-year term ending June 23, 2010. Dr. Kohn is a veteran of the Federal Reserve System. Before becoming a member of the Board, he served on its staff as Adviser to the Board for Monetary Policy (2001-02), Secretary of the Federal Open Market Committee (1987-2002), Director of the Division of Monetary Affairs (1987-2001), and Deputy Staff Director for Monetary and Financial Policy (1983-87).
Dr. Kohn is the Chairman of the Committee on the Global Financial System (CGFS), a central bank panel that monitors and examines broad issues related to financial markets and systems.
Dr. Kohn is married and has two adult children and four grandchildren.

Kevin M. Warsh - took office on February 24, 2006, to fill an unexpired term ending January 31, 2018. Prior to his appointment to the Board, Mr. Warsh served as Special Assistant to the President for Economic Policy and as Executive Secretary of the National Economic Council from 2002 until February 2006. His primary areas of responsibility included domestic finance, banking and securities regulatory policy, and consumer protection.

Randall S. Kroszner - took office on March 1, 2006, to fill an unexpired term ending January 31, 2008. Before joining the Board, Dr. Kroszner served the Federal Reserve System in several roles. He was a visiting scholar at the Board of Governors and a research consultant and a member of the Academic Advisory Panel at the Federal Reserve Bank of Chicago. Dr. Kroszner also has been a visiting scholar at the Federal Reserve Banks of New York, St. Louis, Kansas City, and Minneapolis.

Frederic S. Mishkin - took office on September 5, 2006, to fill an unexpired term ending January 31, 2014. Before becoming a member of the Board, Dr. Mishkin was the Alfred Lerner Professor of Banking and Financial Institutions at the Graduate School of Business, Columbia University, from 1999 to 2006. Dr. Mishkin's research focuses on monetary policy and its impact on financial markets and the aggregate economy. r. Mishkin has been a consultant to the World Bank, the Inter-American Development Bank, and the International Monetary Fund, as well as to numerous central banks throughout the world.

Meetings

The Board usually meets several times a week. Meetings are conducted in compliance with the Government in the Sunshine Act, and many meetings are open to the public. If the Board has convened to consider confidential financial information, however, the sessions are closed to public observation

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