The Federal Reserve

The Federal Reserve

Introduction

Today, almost all countries of the world have 2-tier banking system, the first level of which is the country's central bank, which arose in the course of historical development or initially established by the state. In any case, it imposes a huge responsibility to ensure the stability of the monetary and banking system of the country. It is obvious that the central bank has more authority and not only in the cash issue, but also in the areas of supervision of credit institutions, lending to commercial banks, store foreign reserves, maintaining the government's accounts, etc.

The central banks of different countries, there are significant differences due to economic, historical, and political characteristics of the state (Gagnon, 2010). There are three main models of organization of the central banks traditional, as the American system of organization of the central bank significantly differs.

The first tier of the U.S. banking system is the U.S. Federal Reserve. The importance of its study is not only to its complex organization. The U.S itself is one of the leading countries on the economic stability on which the stability of many other countries depend. According to a report from the UN "World Economic Situation and Prospects, the U.S. is still called the locomotive of the world economy. In this connection, economists need to understand the benefits and features of the organization of the conduct of monetary policy by the U.S. Federal Reserve.

Role and Effectiveness of Federal Reserve in Stabilizing the Current Economy

The role of the central bank in the United States carries out the U.S. Federal Reserve, which was established in accordance with the Act on the Federal Reserve, signed by President Woodrow Wilson on December 23, 1913. In the organizational and functional terms, it combines elements of centralism and a degree of independence in the field, with a marked predominance of centralism. In its structure, the U.S. Federal Reserve has a rather complex structure. The most important role of the Federal Reserve has three basic levels:

Federal Reserve Board of Governors (Washington, DC),

Federal Reserve Banks (FRB) (located in 12 different districts into which the country is divided)

Member banks of the Federal Reserve.

At the head of the Fed is the Board of Governors, which consists of 7 members. They are appointed by the president in consultation with the U.S. Senate for 14 years and, therefore, they cannot be fired. Such a long period is set to ensure the continuity, stability, and independence. If a council member served a full term of his office, he cannot be assigned a second time, which hampers efforts to curry favor with management the president and Congress.

According to the principles of formation of the Board, managers should represent the various Fed districts, so as to the interests of one region of the country do not prevail over the interests of others (Meltzer, 2010). Of the members of the Council President shall appoint the Chairman of the Board of Governors for a term of four years. Through this way the Governor can ...