The Federal Reserve System, commonly referred to as the Fed, is the central banking system of the United States. It is a complex network of 12 regional banks, known as Federal Reserve Banks, working in conjunction with the Board of Governors to manage and regulate the country's monetary system.
The primary responsibility of the Federal Reserve System is to maintain the stability and strength of the nation's financial system. It achieves this through a variety of measures, including setting monetary policy, supervising and regulating banks, and acting as a lender of last resort.
Monetary policy is implemented by the Federal Open Market Committee (FOMC), which consists of the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four rotating presidents from the other regional banks. The FOMC determines the appropriate level of interest rates and manages the supply of money and credit in the economy to promote full employment, stabilize prices, and maintain moderate long-term interest rates.
Furthermore, the Federal Reserve System acts as the primary regulator for banks operating in the United States. It supervises and monitors these institutions to ensure their safety and soundness. The Fed also mitigates the risk of systemic crises through the supervision and regulation of financial markets, including banks, credit unions, securities firms, and insurance companies.
Lastly, the Federal Reserve System serves as a lender of last resort, providing loans to banks and other financial institutions during times of severe financial stress to maintain stability and prevent widespread economic disruptions. These emergency lending facilities serve as a safety net to ensure the continued functioning of the financial system.
