The Fed Explained: What the Central Bank Does

The Federal Reserve system comprises 12 reserve banks that work under its jurisdiction and other banks, institutes and departments. This system controls the flow of money or funds through these bodies and ensures the safety of these bodies. The main focus of this system is the benefit of the general population. Hence, all the monetary policies that are passed through this system hold the best interest of the citizens of the country. This is the very essence of the economy of the States. 

Federal Reserve System

The Federal Reserve System acts as the central bank system in the United States of America. The system includes the 12 reserve banks that come under its jurisdiction and other small banks and institutes that are dependent on it for their funding. The sole purpose of this system is the betterment of the general population. It keeps the best interests of the common people in its mind and makes policies regarding that. This stabilises the economy of the country and leads to the economic growth of the nation. 

The Board of Governors consists of 7 members who are answerable only to Congress. They are the ones who guide this system and the 12 reserve banks that are associated with this system. These members integrate the working of the federal system and the reserve banks to make new policies keeping the interests of people in mind. This committee has full authority to implement any monetary policy that seems fit for public use. It is seen as if this all is for the betterment of the public. These members are appointed by the President of States and work for 14 years. These are held accountable only to Congress and no other working body.

Central bank

Each of the 12 districts that the United States is divided into has one of the Reserve banks on its premises making it a total of 12 reserve banks in the States. Each of the Reserve banks is free to operate as per its own will and can offer its rate of interest, loans or discounts. These are not related to other reserve banks in this way. However, their work must be within the bounds that are set by the Federal Reserve System. This independence of reserve banks from one another helps in the implementation of monetary policies across the country. This means that different benefits can be provided to people residing in different districts. 

It won’t be right to state that the Federal  Reserve acts as the central bank of the United States. The entire system of all the Reserve Banks in the country makes up the system that is the central banking system for the country. And that system is called the Federal Reserve System. This is not a completely independent body, however, it does not rely on the Government either. It is only accountable to the Congress that represents the general interests of the common population.

Functions to promote

The Federal Reserve system regulates and supervises the financial and banking institutions to make them safer for banking methods. This leads to the protection of credit rights of the individuals that have invested in the banking system. This maintains the stability of the banking system and ensures the financial security of every institute that is affiliated with this system. 

This system puts the monetary policies into effect that have the highest probability of supporting the employment and development rates of the citizens of the country. This helps in keeping the prices stable and generating long-term interest. This system leads to better information control between the banking institutes and the general population and helps in the development of new policies. 

Conclusion 

All economic and financial factors that can be related to the growth of the United States of America are controlled by the Federal Reserve System. This system keeps a check on the functioning of the departments that are associated with it. It ensures that the monetary policies that are in the effect, all hold the best interest of the citizens of the country. If that is not the case, then those policies can be amended or can be discarded.