The
Federal Reserve Bank system which is popularly known as The Fed, was established by the National Banking Act of 1863. The fundamental banking organization of the U.S., it acquires its authority from the U.S. Congress which is authorized to overlook all its operations
The Organization of the Federal Reserve Bank system.
The primary composition of the Federal Reserve Bank System includes:
the Federal Reserve Board of Governors
the Federal Open Market Committee
the Federal Reserve Banks
the member banks
Primary responsibilities of the Federal Reserve Bank system.
The responsibilities of the Federal Reserve Bank system are immense. However, the basic responsibilities of the Federal Reserve Bank system can be classified into the following four primary divisions :
to conduct the economic policy of U.S.A. by acting upon money and credit conditions in the national economy in the interest of total employment and stable prices
to supervise and to regulate all the banking institutions in the nation in order to guarantee the security and the stability of the banking and financial system of the whole of U.S.A. and to defend the credit rights of all customers within the nation
to maintain the stability of the financial system in the U.S.A. and to practice a check upon the level of systemic risk which commonly arises in financial markets
to provide a few select economic services to the Federal government of U.S.A., to all the national citizens, to financial organizations, and to external official organizations, influencing the operations of the the national payments system of the U.S.A., in a major way
Confusions regarding the ownership of the Federal Reserve Bank system.
The Federal Reserve Bank system is not materially possessed by anyone. The Federal Reserve Bank system of USA in contrast to being a private, profit-making institution, is an autonomous organization provisioned inside the Federal government. The Federal Reserve Bank system in fact serves a dual purpose. It not only looks after the purposes of the common citizens of the nation but at the same time and it takes care of the private aspects.
The Federal Reserve Bank system, being the central bank of USA, gains its authority from the U.S. Congress. The Federal Reserve Bank system is regarded as an independent central bank in the USA as the resolutions undertaken by it do not have to be sanctioned and authorized by either the President of the Federal government of USA or anyone else in the executive or legislative subdivisions of the Federal government.
The Federal Reserve Bank system does not get financial backing allowed by the U.S. Congress. The conditions of the members of the Board of Governors of the Federal Reserve Bank system spread over much more than a single presidential or congressional term.
The Federal Reserve Bank system, however is subject to the superintendence of the U.S. Congress. As a result of which the U.S. Congress reviews the operations of the Federal Reserve Bank system and may even modify the responsibilities entitled to it by legislative acts, at specific intervals.
The Federal Reserve Bank system has to function within the borders of the total objectives of economic and financial policy established by the Federal government of USA. Thus, the Federal Reserve Bank system may be more correctly distinguished as an independent financial organ within the Federal government.
The regional Federal Reserve Bank number twelve in all. These twelve regional Federal Reserve Banks were constituted by the U.S. Congress as the functioning subsidiaries of the central banking system of the nation. These twelve regional Federal Reserve Banks are coordinated in a manner that is similar to those of the privately owned corporations and this is the root cause of the confusion regarding the ownership of the Federal Reserve Bank system.
The Federal Reserve Banks issues shares to all its member banks. However, owning the Federal Reserve Bank stock is rather different from possessing stocks in a private company. The Federal Reserve Banks do not conduct business for making profits and according to the federal laws in the USA possession of a definite measure of stock is a precondition of membership.
The stock of the Federal Reserve Banks are not subject to sales, trade, or commitment as guarantee for a loan. Dividends allotted for owning the stock of the Federal Reserve Banks are 6 percent per year as according to the Federal law of the nation.
The institutions which are the members of the Federal Reserve Bank system
The National banks of the USA, that is, those particular banks which are chartered by the federal laws of the US government are the authorized members of the Federal Reserve Bank system. In actuality, these are those banks which are certified as per the federal laws of the nation through the Federal Office of the Comptroller of the Currency in the Department of the Treasury under the U.S. Congress.
Banks and trust companies which are chartered by the constituent states of the USA are permitted to go for the membership of the Federal Reserve Bank system. These financial organizations have to make sure of the fact that they meet the requirements set by the Board of Governors of the Federal Reserve Bank system, as a must, in order to be recognized as a member.
Federal Reserve Bank Websites respectively
- Boston www.bos.frb.org/
- New York www.newyorkfed.org/
- Philadelphia www.philadelphiafed.org/
- Cleveland www.clevelandfed.org/
- Richmond www.richmondfed.org/
- Atlanta www.frbatlanta.org/
- Chicago www.chicagofed.org/
- St Louis www.stlouisfed.org/
- Minneapolis www.minneapolisfed.org/
- Kansas City www.kansascityfed.org/
- Dallas www.dallasfed.org/
- San Francisco www.frbsf.org/
The implications of being a recognized member of the Federal Reserve Bank system.
Every certified and recognized member bank must purchase stocks in a measure so that the stocks owned by it is equal to 6 percent of the capital and surplus recorded by it. Out of the 6 percent, 3 percent must be paid in their regional Federal Reserve Bank. The remaining 3 percent is susceptible to being called up by the Board of Governors of the Federal Reserve Bank system.
Possessing stock in any Federal Reserve Bank does not entitle the owner to the control and financial interest that is commonly imparted to owners of common shares and equities in profit making business organizations.
However owning stocks in a Federal Reserve Bank system is actually a legal duty in order to earn the membership of the Federal Reserve Bank system. The shares of the Federal Reserve Bank system cannot be sold off or pledged as a guarantee for loans.
According to the Federal laws of the U.S., member banks of the Federal Reserve Bank system receive an annual 6 percent dividend on shares possessed by them, and are also given vote for certain directors of their Reserve Bank.
The Balance Sheet of the Federal Reserve Bank system as per the latest reports received in June, 2007:
- Total assets of the Federal Reserve Bank system amounted close to $871,000 Millions.
- Total liabilities of the Federal Reserve Bank system was very close to $838,000 Millions.
- Total capital of the Federal Reserve Bank system amount well over the $33,000 Million mark.
Those who are more interested in gaining detailed information regarding the products and services of the Federal Reserve Bank system may log on to federalreserve.gov,federalreserveeducation.org