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The Fed (Part 2 of 2)

     Who is the Federal Reserve? We routinely hear from Chairman Alan Greenspan, but does he unilaterally make the decisions that jerk our lives around or are there other individuals that provide input to Federal Reserve policy? The Federal Reserve is a federal system, composed basically of a central, government agency, the Board of Governors based in Washington D.C., and twelve regional Federal Reserve Banks, located in major cities throughout the nation. After serving a full term a board member can't be reappointed unless they begin by filling a partial term or leave prior to serving a full term. The President of the U.S. selects the Chairman and Vice-Chairman for a 4-year term. The Board of Governors is supported by a Washington staff of 1,700 people.

    Nationwide there is a network of twelve Federal Reserve Banks and twenty-five branch banks. Each Bank is the primary bank in each of twelve Federal Reserve Districts. Each Reserve District is designated by a number and a letter and is run by a nine-member board of directors. The district banks operate a nationwide payment system and distribute the nation's coin and currency.

    The Federal Open Market Committee (FOMC) is made up of the seven Board of Governors members and the presidents of four of the twelve regional Federal Reserve Banks, who serve one-year terms on a rotating basis. The twelfth member of the FOMC is the president of the Federal Reserve Bank of New York who serves on a continuous basis. FOMC activities probably affect our lives more than any other component of the Federal Reserve System. The FOMC oversees open market operations, which is the main tool used by the Federal Reserve to influence the growth of the monetary and credit markets.

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