Federal Reserve System

Topics: Monetary policy, Federal Reserve System, Central bank Pages: 3 (721 words) Published: August 30, 2010
The Federal Reserve System
By Tabitha Scott

Some of us may not understand the functions of the Federal Reserve system or even know how this system operates. The Federal Reserve System was designed to rectify the conditions underlying the recurrent money panics that has long effected our country for many years. The act has been amended several times to further the Federal Reserve System's ability to foster a sound financial system and to support a healthy economy.

The Federal Reserve System advances its goal through several means. Its monetary policy decisions affect the flow of money and credit in the economy. This contributes to the safety of the national financial system by establishing regulations and acting as a commercial bank supervisor. It is also used by serving as a bank for depository institutions and the federal government, the Federal Reserve System helps to ensure that the system of paying for all kinds of business transactions works efficiently.

The structure of this system is to safeguard the Federal Reserve from short-term political pressures while also ensuring its fundamental accountability, the System was set up to be independent within government. We also should know that this system operates on its own earnings rather than on congressional appropriations. The Federal Reserve works within government, however, only in the sense that it formulates monetary policy to reach overall goals that are set forth by Congress and the President himself. Although the Federal Reserves specific decisions does not have to be approved by the President or any other executive branch, the system must however report to Congress. Congress made the Federal Reserve system so Congress has the power to alter/change or even abolish the System at any time they want to. The structure of the Federal Reserve System also includes and provides internal checks and balances ensuring that their decisions and operations are not dominated by any one System...
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