¶ … Federal Reserve Board [...] history of the Board, and what its purpose is in the United States. The Federal Reserve Board is an integral part of the Federal Reserve System of the United States, and it creates and maintains much of the monitorial policy of the nation. The board members are responsible for the monetary health and security of the country, and so shoulder a huge responsibility to the country and to the people.
THE EARLY FED
The Federal Reserve Board is the governing element of the Federal Reserve System, which an act of Congress established on December 23, 1913. The board contains seven members, and is referred to as the "Board of Governors." The seven board members are:
Appointed by the President and confirmed by the Senate to serve 14-year terms of office. Members may serve only one full term, but a member who has been appointed to complete an unexpired term may be reappointed to a full term. The President designates, and the Senate confirms, two members of the Board to be Chairman and Vice Chairman, for four-year terms (Federal Reserve System).
In essence, the Federal Reserve System (known as "The Fed"), serves as the country's central bank, and is made up of the board in Washington D.C., and twelve Federal Reserve Banks across the nation. The Fed web site notes, "The Board sets reserve requirements and shares the responsibility with the Reserve Banks for discount rate policy. These two functions plus open market operations constitute the monetary policy tools of the Federal Reserve System" (Federal Reserve System). Thus, the Board is ultimately responsible for the country's monetary health and well being both here and abroad. Any bank doing business nationally must belong to the system. "All national banks must belong to the system, and state banks may if they meet certain requirements. Member banks hold the bulk of the deposits of all commercial banks in the country" (Editors). Member banks can borrow money from each other at competitive interest rates, and if it is an emergency, they can even borrow money from the Fed itself.
Member banks use their reserve accounts with the reserve banks in much the same way that a bank depositor uses his checking account. They may deposit in the reserve accounts the checks on other banks and surplus currency received from their customers, and they may draw on the reserve for various purposes, especially to obtain currency and to pay checks drawn upon them (Editors).
While the Fed has been in existence since 1913, its history has not been without controversy and change. The Fed does not control fiscal policy for the government, it ultimately controls money policy, and so, it is one of the most important branches of modern government. As the Fed's web site notes, "The seven Board members constitute a majority of the 12-member Federal Open Market Committee (FOMC), the group that makes the key decisions affecting the cost and availability of money and credit in the economy" (Federal Reserve System). The Fed's history is one of controversy and change. One of the biggest alterations to the Fed was the Banking Act of 1935, which came about after the great Stock Market crash of 1929, which helped trigger the Great Depression in the United States.
THE BANKING ACT OF 1935
Congress always has the power to control the Federal Reserve System, and one of the most sweeping reforms of the Federal Reserve Act came in the Banking Act of 1935. Briefly, the legislation was partly written by soon-to-be Federal Reserve Chairman Marriner Eccles and other board members, and the act essentially gave the Fed more authority and control over monetary matters.
The bill went through several revisions. Many who thought it gave too much power to the Fed adamantly opposed it, as they felt it was literally creating a government run bank. However, the revisions finally created a bill that was amenable to all, and the Act was finally passed on July 2, 1935.
T]he revised bill increased the powers of the Federal Reserve Board and gave it a greater degree of supervisory control over the regional Federal Reserve banks. Authority was specifically lodged in Washington. The Senate bill did not streamline the Federal Reserve System in accordance with the provisions originally requested and amended by the House. It endeavored to safeguard the Federal Reserve Board against political domination and to prevent the misuse of Federal Reserve powers by the executive branch of the government
Burns 166).
Thus, the Banking Act of 1935 gave the Fed even...
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