Legal Profile of Financial Agencies

The Federal Reserve

• Created by Congress in 1913 through the Federal Reserve Act, in response to recurring banking panics. It was created as a decentralized central banking system to provide a more stable and flexible monetary and banking environment.
• It is independent of other agencies and branches of government, and is not subject to the Congressional budgetary policy.

Functions

• Conduct US monetary policy
  • This is primarily accomplished through control of interest rates influencing the rates at which banks lend to each other.
• Supervise and regulate the US banking system
• Maintain stability of the financial system and contain systemic risks
  • In response to the Great Depression, the Federal Reserve Act was amended in 1932 to allow the Federal Reserve banks broad power in "unusual and exigent circumstances" to lend money at a discounted rate to any individual, partnership or corporation.
  • Federal Reserve Act Section 13
  • For the first time since the years following the Great Depression, the Fed is using these Section 13(3) powers to lend to an increasing variety of borrowers.
  • History of Section 13 powers
• Provide financial services to depository institutions, the U.S. government, and foreign official institutions

The Fed's Board of Governors

• Has 7 members who are appointed by the President, confirmed by the Senate and serve for 14 year terms.
• Chairman and Vice Chairman are designated by the President, and confirmed by the senate, for a term of 4 years.
• Current Chairman is Ben Bernanke

Federal Reserve Banks

• Function as the operating arms of the central banking system
• There are 25 branches in 12 regions
• Map