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Today the Federal Reserve's duties fall into four general
areas:Federal Reserve System:
FED
(1) conducting the nation's monetary policy;
(2) supervising and regulating banking institutions and protecting the credit rights of consumers;
(3) maintaining the stability of the financial system;
(4) providing certain financial services to the U.S. government, the public, financial institutions, and foreign official institutions.
The Federal Reserve System is the formal name of the central banking system used in the U.S. It also goes by the names "The Fed" and "The Federal Reserve." It was born out of the Federal Reserve Act of 1913 in order to create a centralized banking system so that the American financial system would be more flexible and stronger. The legislation to create the Federal Reserve made it a requirement that all U.S. banks participate in the system, and it even allowed outside banks to become members, and those banks would be governed by reserve banks and a governing board. The Reserve Banks were divided up by regions and there were seven members on the governing board, all of which are appointed by the President and subject to senate approval.
By November 1914, the banks were operational, but there still needed to be a way to create a flexible currency supply. Congress responded by creating Federal Reserve Notes that were issued by the Reserve Banks. The Reserve Banks would provide the notes to various banks when it was deemed that there was a public need. The Federal Reserve Board continues to govern the Federal Reserve Banks, which are owned by commercial member banks.
The Federal Reserve Board makes sure that the banks are fulfilling their responsibilities. The primary job of the Federal Reserve is to regulate banks. It is also the primary control over setting monetary policy, the discount rate, and reserve ratio. The Federal Reserve works with both the U.S. Mint and Bureau of Engraving and Minting to determine how much money remains in circulation as well as conducting research and education about its role in America today.
While the Federal Reserve Board appointees are determined by the President, they are not required to get legislative or executive approval for actions taken and receive no money from Congress. They also are under self-regulation for terms of service, though the President can petition for their removal if he or she feels there is just cause. However, as an independent government agency, the Federal Reserve is still subject to the Freedom of Information Act and the Privacy Act. In 1982, the United States Court of Appeals for the Ninth Circuit heard the case Lewis v. United States in which the question arose as to whether or not the Federal Reserve was accountable under the Federal Torts Claims Act.
The Appeals Court determined that it was
not accountable to the act since it was determined that the Federal
Reserve Banks were considered privately owned and locally controlled, even
thought the opinion did concede that the Federal Reserve Banks were also
federal instrumentalities in some capacities.