The central bank has become the controller of money supply in the economy. The role of Central Bank has grown and evolved since its inception. (Timberlake 15) The U.S. Congress created the Federal Reserve in 1913. Before that, the U.S. required any formal organization for studying and implementing monetary policy. Consequently, markets were often uneven and the public had very little faith in the banking system. The Fed is an autonomous entity but is subject to regulation by Congress. (U.S. Board of Governors of the Federal Reserve System) This means that decisions do not have to be endorsed by the President or anyone else in the government, but Congress sporadically reviews the Fed’s activities.
The Fed is controlled by a government agency in Washington known as the Board of Governors of the Federal Reserve. The Board of Governors consists of seven presidential appointees, who each serve 14-year terms. The Senate must confirm all members, and they can be reappointed. A chairman leads the board and a vice chairman, each appointed by the President and approved by the Senate for 4-year terms. The current chair is Alan Greenspan.
The system also comprises the Federal Open Market Committee, better known as the FOMC. This is the policy-creating branch of the Federal Reserve. Traditionally the chair of the board is also chosen as the chair of the FOMC. The voting members of the FOMC are the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and presidents of four other Reserve Banks who serve on a one-year rotating source.
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