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How is the Federal Reserve System structured?

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The Federal Reserve functions as the central bank for the United States. This means that it is in charge of the country’s monetary policy. It is supposed to keep the US currency stable and maintain a money supply that helps the US economy grow at a good rate. There are two main parts to the Federal Reserve System.

The broader part of the system is made up of Federal Reserve Banks that are located in various cities around the country. There are twelve of these banks. There are also twenty-four branch banks, each of which is controlled by one of the twelve Federal Reserve Banks. Not all of the twelve Federal Reserve Banks has branch banks. The purpose of these banks is to serve private banks, doing things like storing currency, keeping track of transactions, and processing checks for those banks.

The other part of this structure is the Board of Governors in Washington, D.C. There are seven members of this board, each of whom is appointed to a fourteen-year term in office.  The Board of Governors sets policy for the Federal Reserve. The President of the United States appoints members of the board, who have to be confirmed by the Senate. However, there is no direct political oversight of the Board of Governors. In other words, they answer to no elected official and no elected official has the right to tell them what to do. This is meant to allow the Board of Governors to base their decisions on economic conditions, not on political expediency.

This is the basic structure of the Federal Reserve System.

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