Structure and Functions of the Federal Reserve System

The federal system is a body that keeps a major check on the finance of the United States. Its main aim is to provide every citizen with maximum financial security. This leads to the economic stability of the country and enhances the employment rates within the country. It makes the best use of the funds and resources that are available to it and puts those into use for the sake of the citizens of the country. It implements monetary policies that will be beneficial for the general population.

Formulates the nation’s monetary policy

One of the functions of the Federal System is to maximise the rate of employment and stabilise the market prices for the sake of the individuals that belong to the States. The Federal Open Market Committee decides whether a monetary policy will be implemented in the country or not. Only the monetary policy with the beat of results and prospects is chosen by the members of this committee for future discussion. By implementing monetary policies, the federal system can stabilise the prices within the country. This leads to long-term economic and financial growth in the country and also improves the employment rate. 

The rate of interest of the federal reserve greatly affects the rate of interest offered by other banks. Therefore, the federal system stabilises the rate of interest for the other banks as well as individuals. These rates are mainly regulated by the interests on the reserve balances. These are the funds that are deposited as reserved funds. It also greatly impacts the rates of interest that others can change who have their deposits within the federal reserve. It also provides loans to other banks and institutes at a much lower rate of interest.

Board of Governor

The federal system is led by the Board of Governors and is located in Washington, D.C. There are 7 seven members on this board. All of these seven are appointed by the President of the United States and are approved by the Senate. These members of the board are also in control of the branches of federal banks that are located in other areas. This puts the entire economies of those areas within their jurisdiction. Hence, this leads to the better functioning of the federal system. These members are appointed for 14 years. They oversee the functioning of the Federal Reserve Bank and make regulations and policies related to it. 

Supervises and regulates banks

The federal reserve supervises and regulates a large number of banks and institutes that come under its area of influence. This also ensures the better functioning of these institutes. Also, the federal system keeps a check on the services that are being provided to the general public by these institutions. These facilities are needed to be fair and per the policies set by the federal system. These institutes act as the working body for the federal systems and provide it with information that can be utilised in the future for other purposes. The working of the federal system is quite similar to any other financial body. The main source for it is the funds that are generated through revenue and interests from the natives of the country. 

The federal system provides individuals with the prospect of safety. This in itself is the assurance that in due time they will be getting their worth back. These also endure the safety of banks from all kinds of financial frauds. This system monitors the way the money allotted by it to the other institutes is being utilised by them. And, all the institutes are kept within bounds of the rules and regulations that are set up by the federal system. 

Conclusion

The federal system is the body which provides all the banks and financial institutes with security. This plays a major role in maintaining the value of the currency and stabilises the economy of the nation. This system generates funds from the interests of the people and helps in the functioning of the government. It also helps in imposing monetary policies that will be beneficial for the general audience. Henceforth, it maintains the living standards of the country and helps in regulating their financial situations.