Federal Reserve Bank

Filed Under » , , ,
Dictionary Says

Definition of 'Federal Reserve Bank'

The central bank of the United States and the most powerful financial institution in the world. The Federal Reserve Bank was founded by the U.S. Congress in 1913 to provide the nation with a safe, flexible and stable monetary and financial system. It is based on a federal system that comprises a central governmental agency (the Board of Governors) in Washington, DC and 12 regional Federal Reserve Banks that are each responsible for a specific geographic area of the U.S. The Federal Reserve Bank is considered to be independent because its decisions do not have to be ratified by the President or any other government official. However, it is still subject to Congressional oversight and must work within the framework of the government’s economic and financial policy objectives. Often known simply as “the Fed".
 
Investopedia Says

Investopedia explains 'Federal Reserve Bank'

 
The Federal Reserve Bank’s creation was precipitated by repeated financial panics that afflicted the U.S. economy over the previous century, leading to severe economic disruptions due to bank failures and business bankruptcies. An acute crisis in 1907 led to calls for an institution that would prevent panics and disruptions.
 
The 12 regional Feds are based in Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas and San Francisco.
 
The Federal Reserve’s duties can be categorized into four general areas:

  • Conducting national monetary policy by influencing monetary and credit conditions in the U.S. economy to ensure maximum employment, stable prices and moderate long-term interest rates.
  • Supervising and regulating banking institutions to ensure safety of the U.S. banking and financial system and to protect consumers’ credit rights.
  • Maintaining financial system stability and containing systemic risk.
  • Providing financial services – including a pivotal role in operating the national payments system – to depository institutions, the U.S. government and foreign official institutions.
The Federal Reserve’s main monetary policymaking body is the Federal Open Market Committee (FOMC), which includes the Board of Governors, president of the Federal Reserve Bank of New York, and presidents of four other regional Federal Reserve Banks who serve on a rotating basis. The FOMC oversees open market operations, the main tool used by the Fed to influence monetary and credit conditions.
 
The Fed’s main income source is interest on U.S. government securities it has acquired through open market operations. Other income sources include interest on foreign currency investments, interest on loans to depository institutions, and fees for services (such as check clearing and fund transfers) provided to these institutions. After paying expenses, the Fed transfers the rest of its earnings to the U.S. Treasury.

Articles Of Interest

  1.

    How The U.S. Government Formulates Monetary Policy

    Learn about the tools the Fed uses to influence interest rates and general economic conditions.

  2. The Evolution Of Banking

    Banks are a part of ancient history. Find out how this system of money management developed into what we know today.

  3. Get To Know The Major Central Banks

    The policies of these banks affect the currency market like nothing else. See what makes them tick.

  4. How The Federal Reserve Manages Money Supply

    Find out how the Fed manages bank reserves and this contributes to a stable economy.

  5. Using Base Metals As An Economic Indicator

    Base metals may not glitter like gold, but they can still guide an investor to a conclusion about overall economic health.

  6. How The Federal Reserve Was Formed

    Find out how this institution has stabilized the U.S. economy during economic downturn.

  7. The Importance Of Inflation And GDP

    Learn the underlying theories behind these concepts and what they can mean for your portfolio.

  8. Understanding The Federal Reserve Balance Sheet

    We are all connected to the Fed's balance sheet, and the currency notes that we hold are its liabilities.

  9. Bailout Acronyms 101

    The subprime meltdown gave rise to a mouthful of financial acronyms. Learn how to sort through this alphabet soup.

  10. How Much Influence Does The Fed Have?

    Find out how current financial policies may affect your portfolio's future returns.
comments powered by Disqus
Marketplace
Hot Definitions

  1. Network Effect

    A phenomenon whereby a good or service becomes more valuable when more people use it. The internet is a good example...

  2. Racketeering

    Racketeering refers to criminal activity that is performed to benefit an organization such as a crime syndicate. Examples of racketeering activity include...

  3. Lawful Money

    Any form of currency issued by the United States Treasury and not the Federal Reserve System, including gold and silver coins, Treasury notes, and Treasury bonds. Lawful money stands in contrast to fiat money, to which the government assigns value although it has no intrinsic value of its own and is not backed by reserves.

  4. Fast Market Rule

    A rule in the United Kingdom that permits market makers to trade outside quoted ranges, when an exchange determines that market movements are so sharp that quotes cannot be kept current.

  5. Absorption Rate

    The rate at which available homes are sold in a specific real estate market during a given time period.

  6. Yellow Sheets

    A United States bulletin that provides updated bid and ask prices as well as other information on over-the-counter (OTC) corporate bonds...
Trading Center