Three Key Entities Transcript
January 20, 2023 NARRATOR: Hi, I'm Ian and I work for
the Federal Reserve, the central bank of
the United States. The Federal Reserve System
consists of three main entities that perform key functions
that serve the public and promote the health of
our economy and the stability of our financial system. These key entities are:
the Federal Reserve Board of Governors; Twelve
Federal Reserve Banks, operating around our nation; and the Federal Open
Market Committee. Based in Washington DC, the Board of Governors
is the governing body of the Federal Reserve System. It's an agency of the federal
government that reports to and is directly accountable
to Congress. The Board consists of seven
members, or "governors," who are nominated by the
President of the United States and confirmed by the Senate. Governors are appointed
for 14-year terms. The Board of Governors oversees
and sets policy direction for the System, including 12
Federal Reserve Banks located around the country,
which take the pulse of the nation's economic health
from a regional perspective. The 12 Reserve Banks represent
different geographic regions, or districts, and
were set up based on regional economic
considerations. Although supervised by
the Federal Reserve Board, the Reserve Banks operate
independently in many respects. The Reserve Banks carry out a
number of core system functions, such as supervising and
examining commercial banks and other financial
institutions; enforcing compliance with
federal consumer protection and fair lending laws while
promoting local community development; and lending
to depository institutions to ensure crucial liquidity
in the financial system. They, and the Board,
also play a key role in another primary Fed
function: fostering the safety and efficiency of our
nation's payment systems, including distributing
currency and coin to banks, operating electronic
payment systems, and clearing our checks. In addition, the Reserve Banks
act as the "government's bank," providing services such as
maintaining the Treasury Department's transaction
account and issuing and redeeming U.S.
government securities. They also act as
a "bank for banks" by providing key
financial services to banks, thrifts, and credit unions. The Reserve Banks also
provide a wealth of information on conditions across the
nation-information that is vital to formulating a
national monetary policy that helps maintain a
healthy U.S. economy and stable financial system. The Board and the Reserve
Banks, together help ensure that consumer and
community voices are heard at the central bank through
consumer-focused outreach, research, and analysis. This helps keep Federal
Reserve actions, policies, and decisionmaking
attuned to what's going on in American households,
communities, and businesses, which are the foundation
of our economy. The third key Fed entity is the
Federal Open Market Committee, or FOMC, which brings together
representatives-from the Board and the Reserve Banks-to
consider the state of the U.S. economy, and set a
course for our monetary policy in a manner that seeks
to promote an economy that works for all Americans. The 12-member FOMC establishes
an appropriate position or "stance" for monetary policy to help move the economy toward
two essential mandates set for the Fed by Congress: promoting maximum employment
and price stability. This occurs mainly through
the FOMC's influence on interest rates
and credit conditions which can significantly
impact financial conditions, including economic
productivity and even spending and investment decisions
by households, communities, and businesses. Working together, these
three key Fed entities and the unique Federal Reserve
System structure established by Congress more than a century
ago help promote conditions resulting in a strong, healthy,
and sustainable economy. For more information on
how the Fed functions, visit www.federalreserve.gov
and click on About the Fed.
