The Federal Reserve Banking System

Essay by PaperNerd ContributorUniversity, Master's December 2001

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The Federal Reserve Banking System is composed of the Board of governors, twelve Federal Reserve banks, commercial banks, thrift institutions and the public. The Board of governors direct the activity's of the 12 Federal reserve banks, which in turn control the lending activity of the nations commercial bank and thrift institutions which then lend and save money for and to the public. The Board of governors is compiled of 7 presidential appointed and senate confirmed board members which take advice in directing the 12 Federal Reserve banks from the Federal Open Market committee and the 3 Federal Advisory Councils. The FOMC is composed of the 7 Board of Governors members and five of the presidents of the 12 Federal Reserve Banks. The FAC is composed of 12 commercial bankers, one selected annually by each of the 12 Federal Reserve Banks. The Thrifts Institutions Advisory council consists of representatives from S&L associations, savings banks and credit unions.

The third of the Federal Advisory Councils is the 30 member Consumer Advisory Council that includes representatives of consumers of financial services and academic and legal specialists in consumer matters. The FOMC and the FAC our very important because they give the Board of governors a good foundation of what's going on monetarily in society so that the Board of Governors will make sound decisions when directing the central banks. Together the 12 Federal Reserve banks are quasi-public banks, which serve as our central bank. Each of those central banks are owned by the commercial banks in each of the central banks districts since the commercial banks are required to purchase shares of stocks in the central Banks in their districts.

Despite the private ownership, the 12 Federal Reserve banks are in practice public institutions since they are not profit motive and in effect...