FEDERAL RESERVE: Bank Reserve Fedral * Note Fedreal Reserve System Fereral Board Interest rate

Federal reserve...

Federal Reserve Bank: The Federal Reserve Bank is one of the 12 operating sections of the Federal Reserve System, located throughout the United States. This bank with 25 branches carry out various functions, such as operating a nationwide payments system, distributing the nation's currency and coin, supervising and regulating member banks and bank holding companies and serving as banker for the US Treasury. Each bank has its own president and board of directors. The directors represent members from various sectors of the economy, including business and industry, agriculture, finance, labor, and consumers. The president has the term of five years. Each reserve bank is self sufficient and does not receive any budget from Congress. The commercial banks which are the members of the Federal Reserve System own the stock of the reserve banks. The dividends are distributed at a fixed rate of 6 percent to stockholders semiannually. The Prime rate is one of several base rates used by banks to price short-term business loans. All the earnings in excess of expenses of the reserve banks are returned to the US Treasury at the end of each year. The Federal Reserve banks located at 12 districts are given below.

The Federal Reserve Bank of Boston
The Federal Reserve Bank of New York
The Federal Reserve Bank of Philadelphia
The Federal Reserve Bank of Cleveland
The Federal Reserve Bank of Richmond
The Federal Reserve Bank of Atlanta
The Federal Reserve Bank of Chicago
The Federal Reserve Bank of St. Louis
The Federal Reserve Bank of Minneapolis
The Federal Reserve Bank of Kansas City
The Federal Reserve Bank of Dallas
The Federal Reserve Bank of San Francisco

Federal Reserve Note: The Federal Reserve Notes are issued by the Federal Reserve System and forms the main currency of the United States. The notes are legal tender and have replaced the United States notes. Printed by the Bureau of Engraving and Printing (BEP), these notes are given to the Federal Reserve for nominal costs. They carry the signature of the Treasurer of the United States and the United States Secretary of the Treasury. The commercial banks of the Federal Reserve Systems can obtain the notes from the Federal Reserve Bank in its district by paying in full through its account. The Federal Reserve Act of 1913 gives the authority of issuing notes to the Federal Reserve Banks. They are the liabilities of the Federal Reserve banks and the obligations of the United States Government.

Federal Reserve System: The Federal Reserve System forms the central banking system of the United States. It has a Board of Governors of the Federal Reserve System in Washington, D.C., the Federal Open Market Committee, the 12 regional Federal Reserve Banks located in major cities throughout the nation, and numerous private member banks. The FOMC meeting is held eight times per year to set Federal Reserve guidelines regarding the purchase and sale of government securities in the open market as a means of influencing the volume of bank credit and money in the economy. The Federal Reserve System was established through the Federal Reserve Act of 1913. The main tasks of the Federal Reserve System are given below.

To conduct the nation’s monetary policy by influencing the monetary and credit conditions in the economy in pursuit of maximum employment, stable prices, and moderate long-term interest rates
To supervise and regulate the banking institutions in order to ensure the safety and soundness of the nation’s banking and financial system and to protect the credit rights of consumers
To maintain the stability of the financial system
To provide financial services to depository institutions, the U.S. government, and foreign official institutions

The Size of the money supply is controlled by the Federal Reserve System through open market operations held at Open Market Desk at the Federal Reserve Bank of New York. The repurchase agreements and the outright transactions are the two main tools used to adjust the monetary supply. The federal funds rates are adjusted by 0.25% or 0.5% at a time. With the interest rates being cut to 1.75% in November 2002, the interest rates went below the inflation rate which was also known as negative real interest rate. The latest interest rate as on 8^th August 2006 is 5.25%.

Federal Reserve Board: The Federal Reserve Board is an independent government agency which is subject to laws like the Freedom of Information Act and the Privacy Act which cover the Federal agencies but not the private entities. The Chairman of the Board of Governors of the Federal Reserve System is the head of the central banking system of the United States and one of the more important decision-makers in American economic policies.There is no funding from the Congress to the Board of Governors. The Board decisions do not require ratification by the President or any other executive or legislative authorities of the government. Once the member of the Board of Governors is appointed by the President, then that member is relatively independent.