What Is the Federal Reserve Board (FRB)?
The Board of Governors of the Federal Reserve System, also known as the Federal Reserve Board (FRB), is the governing body of the Federal Reserve System. The FRB was established by the Banking Act of 1935. The members are tasked with representing the financial, agricultural, industrial, and commercial interests and geographical divisions of the country.
Key Takeaways
- The Federal Reserve Board (FRB) is the governing body of the Federal Reserve System, America’s central bank.
- The FRB is an independent governmental agency that conducts monetary policy through open market operations or setting interest rates.
- The FRB is composed of seven members, including a chair, appointed by Congress from among the regional federal reserve banks.
How the Federal Reserve Board (FRB) Works
The Board of Governors of the Federal Reserve System, also known as the FRB, is a seven-member body that governs the Federal Reserve System, the U.S. central bank responsible for the country’s monetary policy.
Members of the U.S. Senate-confirmed FRB are considered an independent agency of the federal government. The Fed has a statutory mandate to maintain maximum employment and stable prices at moderate long-term interest rates. Although the FRB chair and other officials frequently testify before Congress, the Board makes monetary policy independently of the legislative or executive branches and functions much like a private corporation.
The Vice Chairman is required to appear before both the Senate and the House of Representatives at semi-annual hearings to discuss the Board’s objectives, actions, and plans.
Appointments, Terms, and Roles
The President appoints the FRB’s members, confirmed by the Senate, each serving a single 14-year term, although they may serve shorter or longer periods. New board members fill the remaining term of outgoing members and can be reappointed for one full term. Unconfirmed replacements may continue serving beyond the term’s expiration under specific conditions. The President can remove members for sufficient cause. Terms are staggered so a new one begins every two years. Once appointed, each board member operates independently.
The chair and vice-chair for supervision are appointed by the President from existing board members for four-year terms and can be reappointed as long as their term limits as board members allow.
The board of governors includes several subcommittees, each helmed by chairs and vice-chairs. They deal with board affairs, consumer and community matters, economic and monetary concerns, financial stability, Federal Reserve Bank affairs, supervision and regulation, payments, clearing, and settlement, and smaller regional and community banking issues.
Current Federal Reserve Board members:
- Jerome H. Powell (Chair)
- Philip N. Jefferson (Vice Chair)
- Michael S. Barr (Vice Chair for Supervision)
- Michelle W. Bowman
- Lisa D. Cook
- Adriana D. Kugler
- Christopher J. Waller
Duties of the Federal Reserve Board (FRB)
The most critical role of the Federal Reserve Board members is as members of the Federal Open Market Committee (FOMC), responsible for the open market operations that determine the federal funds rate, a pivotal benchmark interest rate globally. Including the seven governors, the FOMC comprises the president of the Federal Reserve Bank of New York and four rotating branch presidents. The FRB chair also chairs the FOMC.
The FRB directly manages two other monetary policy tools: the discount rate (based on regional branch recommendations) and reserve requirements. It also supervises the Fed’s 12 regional branches.
Administration of the Federal Reserve Board Officers
The Board’s principal offices are located in Washington, D.C. The chairman presides over meetings, and the vice chairman does so in the chairman’s absence. If both are absent, the Board elects a member as acting chairman temporarily.
The Board funds its operations and salaries through assessments on Federal Reserve banks, with board members prohibited from holding positions or stocks in banks or related institutions. Each board member must certify this under oath.
How Does the Federal Reserve Board Influence Interest Rates?
The Fed influences interest rates via open market operations, buying or selling government securities to control the federal funds rate. This adjustment in money supply impacts short-term interest rates and broader financial conditions.
What Is the Structure of the Federal Reserve System?
The Federal Reserve System consists of the Board of Governors in Washington, D.C., and 12 regional Federal Reserve Banks across the country. These regional banks serve as operational and financial centers, supporting core central banking functions.
What Is the Relationship Between the Federal Reserve and the U.S. Treasury?
Although the Federal Reserve and the U.S. Treasury are separate entities, they collaborate on various issues, including debt management. The Fed purchases and holds Treasury securities issued by the U.S. Treasury to finance government activities.
How Does the Federal Reserve Board Respond to Financial Crises?
During financial crises, the Fed provides liquidity to banks and financial markets to prevent financial system collapse. It employs emergency loans and utilizes unconventional monetary policy measures to stabilize the economy and restore confidence.
The Bottom Line
The Federal Reserve Board, commonly known as the Fed, governs America’s central banking system. Its primary mission is to control monetary policy, promoting stable prices, sustainable economic growth, and full employment. The Federal Reserve Board uses various tools, including interest rate adjustments and open market operations, to influence the money supply and the broader economy.
Related Terms: Federal Reserve System, Federal Open Market Committee, U.S. Treasury, discount rate.
References
- Federal Reserve Board. “Structure of the Federal Reserve System”.
- Federal Reserve History. “Banking Act of 1935”.
- Federal Reserve System. “FAQs: Who are the Members of the Federal Reserve Board, and How are They Selected?”
- Federal Reserve Board. “What Does it Mean That the Federal Reserve Is Independent Within the Government?”
- Federal Reserve Board. “Monetary Policy Principles and Practice”.
- Board of Governors of the Federal Reserve System. “Federal Reserve Act, Section 10 (Board of Governors of the Federal Reserve)”.
- Federal Reserve Board. “Board Members”.
- Federal Reserve Board. “Board of Governors Members, 1914-Present”.
- Federal Reserve Board. “Federal Open Market Committee”.
- Federal Reserve System. “Policy Tools”.
