[Joseph_E._Stiglitz,_Carl_E._Walsh]_Economics(Bookos.org) (1)

The Federal Reserve was created by an act of Congress in 1913. In other countries,
the central bank is a purely governmental institution, similar to the U.S.
Treasury or the Environmental Protection Agency. When Congress set up the United
States’ central bank, however, it established a unique hybrid with both public and private
aspects. The Federal Reserve is overseen by a seven-member Board of Governors
in Washington, D.C. Governors are appointed to fourteen-year terms (although the
average length of service is about seven years) by the president, subject to confirmation
by the Senate. The president appoints one of the governors to serve as chair
(also subject to Senate confirmation); the chair serves for four years and can be
reappointed. From 1987 to 2005, the chair was Alan Greenspan, who was originally
appointed by President Ronald Reagan and was reappointed by Presidents George
H. W. Bush, Bill Clinton, and George W. Bush. Because the Fed chair plays a critical
role in setting U.S. monetary policy, the chair is often described as the second most
powerful person in the United States.
In addition to the Federal Reserve Board, the 1913 Federal Reserve Act established
twelve regional Federal Reserve banks; their location is shown in Figure 28.6.
These banks are officially “owned” by the private commercial banks that are members
of the Federal Reserve System (about 3,700 member banks in total). The directors
of each regional Federal Reserve bank are appointed by the member banks and
by the governors of the Federal Reserve Board. These directors, in turn, choose the
presidents of the regional Federal Reserve banks.
The Federal Reserve Board of Governors in Washington, D.C., and the regional
Federal Reserve banks collectively form the Federal Reserve System. The structure
12
12
San Francisco
12
10
Federal Reserve bank cities
Boundaries of Federal Reserve districts
Boundaries of Federal Reserve branch territories
State borders
Federal Reserve Board, Washington, D.C.
9
Minneapolis
Kansas
City
Dallas
11
Chicago
St.
Louis
8
7
6
Cleveland
4
Atlanta
3
5
2
1
Boston
New York
Philadelphia
Federal Reserve
Board
Richmond
Figure 28.6
FEDERAL RESERVE DISTRICTS
The nation is divided into twelve Federal Reserve districts.
THE FEDERAL RESERVE ∂ 627