US Congress and the President - Essay Example

The Federal Reserve Bank is a significant organization in the United States of America. Nevertheless, it is one of the least comprehended institutions. There is a large amount of confusion about who coordinates, organizes, and administrates its activities. The Federal Reserve Bank is a public, private, decentralized, and centralized institution. The Federal Reserve Bank can undertake its activities outside the control of the administration, but it does not mean it is outside the control of the government (Arthur 417). This paper will look at the Federal Reserve Bank’s organizational structure and its roles in governing monetary policy.

The structure of the Federal Reserve Bank consists of Member banks, Reserve Banks, the Federal Open Market Committee, the Board of Governors, and congress, and the President.

Member Banks

Member Banks refer to private banks, for example, Bank of America, which has the stock in any of the twelve local Reserve Banks. Every countrywide chattered bank must own stock in the Federal Reserve. In addition, state-chartered banks or financial institutions may decide to own stock or not if they satisfy a number of conditions. The stock held by these banks cannot be traded or sold like ordinary stock and constituent banks get a fixed amount of dividend every year on this stock (Arthur 417). Moreover, constituent banks have the dispensation of selecting a number of the officials on the board of their regional Reserve Banks.

Reserve Banks 

The operating arm of the Federal Reserve Bank is made up of twelve regional Reserve Banks. These regional Reserve Banks have the responsibility of regulating and supervising constituent banks. In addition, the regional Reserve Banks are charged with the responsibility of handing out coins and currency to affiliate banks (Arthur 418). Every Reserve Bank is made up of nine board of directors. Affiliate banks choose six of the nine boards of directors while the Board of Governors selects the remaining three boards of directors.

Federal Open Market Committee

The Federal Open Market Committee is concerned with open market operations. This means the Federal Open Market Committee engages in selling and buying of Americas Treasury securities. The Federal Open Market Committee is made up of five officials from the Board of Governors. The five individuals are New York’s Reserve Bank chairman and heads of any four Reserve Banks (Arthur 418). Officials from Reserve Banks operate on a rotary process, and only the official from the Reserve Bank of New York serves on a permanent basis.

Board of Governors 

The Board of Governors constitutes seven officials who are picked by the American President and approved by the American Senate. The Board of Governors also comprises a chairperson and a vice-chairperson. Every official in the Board of Governors holds his position for up to fourteen years. Also, these officials cannot be reappointed after the expiry of their terms. The fourteen-year term serves as a precaution for the Federal Reserve Bank to conduct its functions without any political interference (Arthur 419). The president picks two officials from the board, one of the officials becomes the Chairperson and the other becomes the vice-chairperson. The two ranks last for a four-year duration.

Congress can hold the Federal Reserve Bank accountable for its activities. In addition, Congress can control both the Federal Reserve Bank’s responsibilities and activities by law (Arthur 420). This means Congress can change the activities of the Federal Reserve Banks by enforcing new laws.

The Federal Reserve Bank also has roles associated with governing monetary policy. The Board of Governors has the responsibility of establishing monetary policy and administering the laws that control the commercial banking system. First, the Federal Reserve Bank regulates the commercial banking system. The Board develops and directs rules meant to keep banks financially stable and deter banks from utilizing market control to benefit from the public.

Third, the Federal Reserve Bank controls financial organizations to safeguard consumer credit through the Truth in Savings Act, Home Mortgage Disclosure Act, Truth in Lending Act, and Equal Credit Opportunity Act. Finally, it also sets the discount rate (Arthur 421).