Fed: what is it, the history of the formation of the US Central Bank. Who owns the US Federal Reserve System? Who controls the Federal Reserve System?

In this article we will look at what constitutes Federal Reserve System (FRS) of the USA how it was created, what it includes, how it functions, etc. All this is very important to know and understand, since the US Federal Reserve has a significant influence on economic processes not only in America, but throughout the world.

So, the Federal Reserve System (Federal Reserve, Fed, Fed, Federal Reserve) is a structure that performs the functions of the US Central Bank. The Federal Reserve has been operating since December 23, 1913, when it was created with the aim of counteracting the powerful threats that befell the country's banking system (before that, the functions of the Central Bank in the United States were performed by several National Banks, which were no longer coping with their task and could not adequately withstand negative processes in economics).

Structure of the US Federal Reserve.

In the first years of its existence structure of the US Federal Reserve changed several times, and finally, in 1935, it acquired the form in which it functions to this day. The US Federal Reserve System includes:

Federal Reserve Banks in the amount of 12 pieces, they are also regional branches of the Federal Reserve System. Federal Reserve Banks are located in 11 different cities in different US states: Boston (Massachusetts), New York (New York), Philadelphia (Pennsylvania), Cleveland (Ohio), Richmond (Virginia), Atlanta (Georgia), Chicago (Illinois), St. Louis (Missouri), Kansas City (Missouri), Minneapolis (Minnesota), Dallas (Texas), San Francisco (California). And, accordingly, they have the names Federal Reserve Bank of Boston, Federal Reserve Bank of New York, etc.

Each Fed bank has its own board of governors, consisting of 9 members of three categories: A, B and C, each of which has its own functions. The Fed's Federal Reserve Banks are commercial entities, not government entities.

Federal Reserve Board of Governors- the body that manages the system, consisting of 7 employees who are appointed by the President of the United States and then confirmed by the Senate. Members of the Board of Governors are appointed for 14 years, without the right of reappointment. The powers of the Federal Reserve Board of Governors concentrate all the key functions of any Central Bank: operations with securities on the open market, changing the discount rate and reserve norms for commercial banks.

Federal Open Market Committee US Federal Reserve(known as the FOMC) is a body that is responsible for the stability of prices in the country, ensuring economic growth, regulating the labor market, as well as issues of international trade and external payments. This committee consists of 12 people: 7 members of the Board of Governors and 5 presidents of the Reserve Banks.

These are the main institutions that make up the structure of the US Federal Reserve. In addition to them, it also includes 3 advisory councils:

Consumer;
Society of Depository Institutions;
Federal.

Thus, the highest governing body of the US Federal Reserve System is the Board of Governors, which, in turn, is appointed by the president and approved by the Senate. Today the Chairman of the Board of Governors is Janet Yellen.

The main feature of the US Federal Reserve System, which distinguishes it from the Central Banks of other countries, is that the Fed is a commercial structure created at the expense of private rather than state capital. The Federal Reserve is a joint stock company whose shares can be freely purchased by US commercial banks that meet certain requirements. After purchasing a block of shares, the credit structure becomes a member bank of the Federal Reserve System. Today, more than 1,900 US national banks and more than 800 individual state banks are members of the Fed. At the same time, in the country as a whole, only about 40% of credit institutions are shareholder members of the Federal Reserve System.

It is important to note that Fed shareholders have fairly limited rights compared to shareholders of other companies. For example, they cannot influence the adoption of important decisions on monetary policy - this is within the competence of the Board of Governors.

At the same time, there are 2 bodies in the country that control the activities of the Federal Reserve System - the House of Representatives of the US Congress and the Banking Committee of the US Congress. These structures conduct audits of the Federal Reserve and analyze its reporting. Also, according to the Federal Reserve Act, the president of the country has the right to dismiss any member of the Board of Governors, but in practice such cases have not yet occurred. But no one can veto any decision of the Board of Governors.

Functions of the US Federal Reserve.

Let's look at the main functions that the US Federal Reserve System performs.

Money issue. The Federal Reserve has exclusive authority to determine the need and volume of issuing dollars. In practice, issued dollars are overwhelmingly invested in the purchase of US Treasury bonds as the main asset of the Fed, after which they enter circulation.
Supervisory and regulatory functions. Like any Central Bank, the US Federal Reserve supervises and regulates the country's banking system: issues regulations for commercial banks, licenses them, controls their work, etc.
Balance of respect for the interests of citizens and credit institutions. In particular, this includes protecting the rights of borrowers and bank depositors, regulating interest rates, etc.
Ensuring economic stability in the country. This is also one of the important functions of the Federal Reserve System, which the system performs along with some other US structures.
Providing liquidity and lending to the banking system. Like any central bank, the US Federal Reserve monitors the country's banks' compliance with mandatory liquidity standards and, if necessary, provides loans to commercial banks. The Federal Reserve also stores the required reserves of the country's banks.
Management of the system of internal and external payments.
Providing depository services for government agencies and official international companies.
Strengthening the influence and role of the United States in the global economy.

The main goal of the US Federal Reserve, like any Central Bank, is to ensure stable economic growth in the country with optimal inflation rates.

US Federal Reserve System: interesting facts.

Because the Fed is a for-profit shareholder, it earns profits, which it uses to pay staff and also distributes to its shareholders in the form of . But the main share of the income of the US Federal Reserve System is transferred to the federal budget of the country - to the US Treasury.

The very principle of money emission carried out by the Fed is also interesting. In fact, it turns out that US dollars do not belong to the state, but belong to a private joint stock company. Dollar bills are labeled “Federal Reserve note,” which means “Federal Reserve Note” (not U.S. note). The state actually borrows dollars from the Fed for its bonds, which it then repays with interest. This is such an interesting scheme.

The meetings of the US Federal Reserve are always of particular importance, at which certain decisions regarding the country's monetary policy are made. The meetings themselves take place several times a year, sometimes every month, sometimes not. The schedule of US Federal Reserve meetings is prepared in advance for the whole year, their dates are always known. For example, a total of 8 such events are planned for 2016.

Since the dollar is the main world currency, such decisions always have a very significant impact not only on the US economy, but also on the entire world economy: on securities quotes, exchange rates, the cost of goods in global demand, etc. Therefore, the meetings of the US Federal Reserve always attract the attention of financiers, analysts, and stock traders around the world. Meetings always end with a press conference by the Fed Chairman, and their results are published at 14:00 New York time. It is at the time of press conferences and the publication of reports that significant fluctuations in world markets always occur.

The history of the US Federal Reserve suggests that the system was most often led by financiers who were competent and independent in their decisions, who did not engage in populism, but actually solved global problems facing the structure, sometimes acting with new, non-standard methods. For example, it was the US Federal Reserve System that developed and successfully implemented. The Federal Reserve has repeatedly demonstrated its competent fight against inflation and deflation and its successful overcoming of powerful financial crises.

The leading position of the US economy and the US currency in the world can also be considered one of the significant achievements of the Fed.

Now you have an idea of what the US Federal Reserve System is, what it consists of and how it functions.

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An organization that performs the functions of the United States Central Bank. An independent agency within the US government.

Source: https://www.youtube.com/watch?v=KggHsajMwYo

Since February 2015, Janet Yellen has been the Chairman of the Federal Reserve.

History of the creation of the Federal Reserve System

The Federal Reserve System began in 1913, when the Federal Reserve Act was passed. Before the creation of the Fed, there was a system of private banks that were unable to create an effective centralized country. The creation of the Fed was the result of counteracting a series of interbank crises in 1873, 1893 and 1907, which made the need for a single regulatory and issuing body apparent.

Composition of the Federal Reserve System

The Fed includes 12 Federal Reserve Banks located in the largest cities, about three thousand commercial so-called member banks, a presidentially appointed Board of Governors (consists of seven people appointed by the President of the United States and approved by Congress for a period of 14 years) Federal Open Market Committee market and advisory advice.

Functions of the Federal Reserve System

fulfilling the tasks of the Central Bank of the country;
maintaining a balance between the public interests in the United States and the interests of commercial banks;
supervision and regulation of the country's banking system, protecting the interests of investors and clients;
carrying out the issue of money - US dollars;
regulation and stabilization of financial markets, risk control;
providing depository services for the US government and official international institutions;
participation in the functioning of the system of international and domestic payments;
eliminating liquidity problems at the local level and providing loans to credit institutions;
strengthening the US role in .

Features of the Federal Reserve System

The main feature is that the system is built not on state, but on private capital.

Control over the activities of the Federal Reserve is carried out by the House of Representatives of the US Congress, to which it must report annually, and the Congressional Banking Committee (reporting twice a year). The Federal Reserve is audited annually. In addition, from the point of view of the law, the US President can fire any Fed governor, but this rule has never been applied to date.

Part of the Fed's profits, received from government securities, as well as as a result of operations on open markets, goes to pay salaries to employees and dividends to banks participating in the system. The main share of income is transferred to the federal budget.

It was created in December 1913 as a body to prevent systematic crises. Gradually, its functions and powers were significantly expanded. But what is the Fed? Is it a “secret society” or just another central bank, albeit of the richest country in the world?

Main functions

The main purpose of the Fed is to conduct monetary policy. Thus, the following answer to the question of what the Federal Reserve is is absolutely correct: it is a body in the United States that regulates the amount of money in circulation by establishing the required reserve ratio, the refinancing rate and open market operations. The Federal Reserve is dedicated to managing inflation and maintaining price stability. The US Federal Reserve also strives to achieve maximum employment levels. The main function of this body is the sustainable economic development of the country. What it is? The Fed envisions GDP growth of 2-3% per year. However, the purpose of the Federal Reserve System is not limited to this. The Fed meeting may touch on the topic of regulating commercial banks to protect consumer rights. The discussion may also be related to maintaining the stability of financial markets and preventing potential crises. Moreover, the Fed provides services to the American government, federal and foreign banks.

Structure

Consideration of the question of what the Federal Reserve System is would not be complete without studying the components of this body. There are three of them in total. The Board of Governors is the main body. It manages monetary policy. The Federal Reserve Board of Governors has seven members. They are responsible for setting the discount rate and reserve requirements for member banks. Any decision by the Federal Reserve is based on the analysis carried out by its employees. All findings are published monthly in the so-called “Beige Book,” and the Congressional Monetary Report is published every six months. Another component is the Federal Open Market Committee (FOMC). Its task is to set a target rate for funds. The Federal Committee includes members of the Board of Governors and 4 of the 12 presidents of member banks. This body meets eight times a year. Another component of the Fed is the member banks themselves. They supervise commercial financial institutions and monitor the implementation of chosen monetary policies. Each of the 12 member banks is in its own district.

History of origin

The first attempts to create a more flexible monetary system in the United States were made back in the 18th century. The First and Second Banks were created in 1791 and 1816, respectively. Each of them lasted about 20 years. Both First and Second Bank had branches throughout the country and served the government, monetary institutions, and private clients. In general, their performance was satisfactory. However, a significant part of the population did not have any confidence in them. The decline in their authority was associated with worsening political contradictions, so they closed. The Panic of 1907 prompted Congress to create the Federal Reserve System. The National Monetary Commission was established to evaluate methods to prevent constant financial panics and business bankruptcies. In 1913, Congress passed the Federal Reserve Act. It was originally planned that the Fed would have much less power than we see now. It was supposed to support the creation of member banks, increase the elasticity of the currency and the efficiency of the entire system as a whole. However, gradually the range of powers of the body in question expanded significantly, which is associated with the periodic occurrence of crises requiring state intervention.

Who owns the Fed?

The Federal Reserve System is an independent bank. The decisions of the FOMC and the Board of Governors are based on research by Fed staff. They are not ratified by the President, the Treasury Department, or Congress. That is, they are independent. However, members of the Board of Governors are elected by the President and confirmed by Congress. Thus, the government controls the long-term policy of the Federal Reserve System. Some officials are so suspicious of the latter that they see the need for a complete cessation of its activities. Senator Rand Paul believes the system needs to be audited more thoroughly.

Role of the Chairman

The head of the Federal Reserve sets the direction of monetary policy. Between 2014 and 2018, Janet Yellen served as chairman. She focused her attention on overcoming unemployment, which was her academic specialty. So it lowers interest rates. Many experts believe that her actions are only aggravating the crisis, and the economy needs opposite measures to stabilize. He served as chairman from 2006 to 2014. He was an expert on the Fed's role during the Great Depression. It was thanks to Bernanke that the consequences of the recent recession were mitigated.

Federal Reserve System(Fed) is an organization that performs the functions of the US Central Bank.

The history of the Federal Reserve dates back to 1913, when the Federal Reserve Act was adopted. The predecessors of the Fed were successively several private banks, which were unable to create an effective centralized financial system for the country. The creation of the Fed was the result of counteracting a series of interbank crises in 1873, 1893 and 1907, which made the need for a single regulatory and issuing body apparent.

Today, the Federal Reserve System assumes the following functions:

fulfilling the tasks of the Central Bank of the country;
maintaining a balance between the public interests in the United States and the interests of commercial banks;
supervision and regulation of the country's banking system, protection of the interests of investors and clients of credit institutions;
carrying out the issue of money - US dollars;
regulation and stabilization of financial markets, risk control;
providing depository services for the US government and official international institutions;
participation in the functioning of the system of international and domestic payments;
eliminating liquidity problems at the local level and providing loans to credit institutions;
strengthening the role of the United States in the global economy.

Today, the Fed includes the following main structural units: a board of governors, consisting of seven people appointed by the President of the United States and approved by Congress for a term of 14 years; The Federal Open Market Committee, the Federal Advisory Council, 12 Federal Reserve Banks, which are regional representatives of the Federal Reserve, and other credit institutions that are participants in the system.

The peculiarity of the Federal Reserve System (unlike traditional central banks of other countries, for example the Bank of England or the Central Bank of the Russian Federation) is that it is built not on public, but on private capital. Any credit institution that meets the Federal Reserve's requirements can purchase its shares. This allows you to receive a fixed dividend income, and also gives you the right to vote in the election of six of the nine managers of regional branches.

One of the most important functions of the Federal Reserve System is the issue of money. In practice, it is done as follows. The money issued is used primarily to purchase U.S. government debt—Treasuries. Only then do the banknotes go into circulation.

Basic discount rate 1.0% (+0.25%) 15.03.2017. Basic deposit rate 0.50 % (-0.75%) 16.12.2008. Web site www.federalreserve.gov Federal Reserve System at Wikimedia Commons

From a governance perspective, the Fed is an independent agency within the US government. As the nation's central bank, the Fed receives its powers from the US Congress. Independence in operation is ensured by the fact that decisions made on monetary policy do not have to be approved by the President of the United States or any other executive or legislative branch of government. The Fed does not receive funding from Congress. The terms of office of members of the Board of Governors of the Federal Reserve System span multiple terms of the President and members of Congress. At the same time, the Fed is controlled by Congress, which often reviews the Fed's activities and can change the Fed's responsibilities by legislative means.

From 2006 to 2014, Ben Bernanke served as Chairman of the Federal Reserve Board of Governors. He was replaced in February 2014 by Janet Yellen, who served as his deputy for two years. Since February 5, 2018, the head of the Federal Reserve has been Jerome Powell.

History of the Fed

The first institution to serve as a central bank in the United States was the First Bank of the United States, created by Alexander Hamilton in 1791. His powers were not renewed in 1811. In 1816, the Second Bank of the United States was formed; his term was not renewed in 1836 after he became the target of criticism from President Andrew Jackson. From 1837 to 1862 there was no formal central bank. This time is called the “era of free banks” in the United States. From 1862 to 1913, a system of national banks operated in the United States under the relevant law. A series of banking panics - in 1873, 1893 and 1907 - created serious demand for the creation of a centralized banking system.

Timeline of US central banks:

1791 - 1811: First Bank of the United States
1811 - 1816: The central bank was absent
1816 - 1836: Second Bank of the United States
1837 - 1862: "The era of free banks"
1863 - 1913: National banks
1913 - present: Federal Reserve System.

Creation of a third central bank

During the last quarter of the 19th century and the beginning of the 20th century, the US economy went through a series of financial panics. The main impetus for the creation of a third central bank was the banking panic of 1907. Many economists and supporters of the Federal Reserve argued that previous systems had two major flaws: an "inelastic" currency and a lack of liquidity. In 1908, following the financial crisis of 1907, Congress passed the Aldrich-Vreeland Act, which created the National Currency Commission to study possible options for monetary and banking reform.

Federal Reserve Act

In 1910, leading US financiers (Nelson Aldrich himself, bankers Paul Warburg, Frank Vanderlip, Harry Davidson, Benjamin Strong, Assistant Secretary of the US Treasury Piatt Andrew) brainstormed for ten days on Jekyll Island to develop a compromise regarding structure and functions future central bank. The result was a scheme that Aldrich presented to the United States Congress.

Aldrich advocated a completely private central bank with minimal government intervention, but made the concession that the government should be represented on the board of directors. Most Republicans approved of Aldrich's plan, but their support was not enough to pass the law in Congress. Progressive Democrats preferred a reserve system that was owned and operated by the government, not controlled by bankers and stockbrokers. Conservative Democrats championed the idea of a private but decentralized reserve system that, through decentralization, would be taken away from the control of Wall Street. The Federal Reserve Act, passed by Congress in 1913, reflected the views of the predominantly US Democratic Party; most Republicans opposed its adoption.

1923 - The Open Market Investment Committee was created to coordinate the activities of the Federal Reserve. Open Market Investment Committee(OMIC)). It included the governors of the Federal Reserve Banks of New York, Boston, Philadelphia, Chicago and Cleveland.

1930 - The Committee was replaced by the Open Market Policy Conference (OMPC), which included managers and board members of 12 Federal Reserve Banks.

1933 - The Federal Deposit Insurance Corporation is formed. Federal Deposit Insurance Corporation(FDIC)). The Federal Reserve Board received the right to make changes to the reserve requirements of banks that are members of the Federal Reserve.

1935 - after the adoption of the Banking Act, the structure of the Federal Reserve System acquired the form that still exists today: the Council received the name Board of Governors of the Federal Reserve System, consisting of 7 people, one of whom is the Chairman of the Council. The Council no longer included the Secretary of the Treasury and the Comptroller of the Currency. The governors of the Reserve Banks were renamed presidents, and the Open Market Policy Association was renamed the Federal Open Market Committee (FOMC).

Modern history of the Fed

In July 1979, US President Jimmy Carter appointed Paul Volcker as chairman of the Federal Reserve. Volcker managed to curb galloping inflation, reducing it to 1% by reducing money emissions and tightening monetary policy. Paul Volcker was replaced as Fed Chairman in 1987 by Alan Greenspan. Ben Bernanke has served as Fed Chairman since February 2006. In February 2014, Janet Yellen took over as Fed Chairman.

Legal status of the Federal Reserve System

In 1982, the Central District Court of California ruled in John Lewis v. United States, which determined that the Federal Reserve Banks, which are part of the Federal Reserve, are not institutions subject to private claims under the Claims Act. against government agencies and employees (Federal Tort Claims Act (English) Russian). This court ruling relates to the practice of applying the Federal Tort Claims Act to the Federal Reserve Banks and does not make any determination regarding the status of the Federal Reserve as a whole.

Functions of the Federal Reserve

Current functions of the Fed:

Organizational structure

Federal Reserve Structure

Consumer Advisory Council (English) Russian
(English) Russian
Federal Advisory Council (English) Russian

Below is a schematic representation of the structure of the Federal Reserve System, which clearly shows its components (with different forms of ownership) and the amount of power (influence).

		Federal government through the President of the United States
		↓ appointment
FOMC and advisory boards and working committees	→ advice	Board of Governors of the Federal Reserve System		Member banks
		↓ control		↓ shareholders
		Boards of Governors of the Federal Reserve Banks	→ control	12 regional Federal Reserve Banks

Top management

The governing body of the Federal Reserve is the Board of Governors of the Federal Reserve System, consisting of 7 members, who are appointed by the President of the United States with the approval of the Senate. Each member of the Council is appointed for a non-renewable term of 14 years. One member of the Council is appointed every two years, and each president can thus appoint only two members (or four if the president is elected for a second term), provided that no one vacates the post early.

The Board of Governors is headed by a chairman and his deputy, who are selected by the president from among the seven members of the Board for a term of four years with no restrictions on renewal.

The Federal Reserve Act provides for the right of the US President to dismiss any member of the Board. Thus, President Reagan fired Council Chairman Paul Volcker in 1987.

Stanley Fisher was elected deputy chairman of the board on June 16, 2014, ending his term on June 12, 2018.

The Federal Reserve's headquarters are located in Washington.

Functions of the Council:

supervision of the systemic functioning of the Federal Reserve System;
regulatory decision making;
determination of foreign exchange reserve requirements.

Federal Reserve Banks

Subordinate to the Board of Governors are 12 regional branches of the Federal Reserve System, called “Federal Reserve Banks.” Regional branches are geographically located in 25 branches and exercise their powers in their assigned states, named after the cities in which their headquarters are located (San Francisco, Kansas City, etc.).

Each regional branch has its own board of governors, consisting of 9 members and divided into classes A, B and C, each with three members:

The president of each regional office is appointed with the consent of the Federal Reserve Board of Governors.

Each region has a numerical and letter designation in alphabetical order according to the list:

Territory number	Letter	Center location	Federal Reserve Bank	Website
1	A	Boston (Massachusetts)	Federal Reserve Bank of Boston	http://www.bos.frb.org
2	B	New York (New York State)	Federal Reserve Bank of New York	http://www.newyorkfed.org
3	C	Philadelphia (Pennsylvania)	Federal Reserve Bank of Philadelphia (English) Russian	http://www.philadelphiafed.org
4	D	Cleveland (Ohio)	Federal Reserve Bank of Cleveland (English) Russian	http://www.clevelandfed.org
5	E	Richmond (Virginia)	Federal Reserve Bank of Richmond (English) Russian	http://www.richmondfed.org
6	F	Atlanta (Georgia)	Federal Reserve Bank of Atlanta (English) Russian	http://www.frbatlanta.org
7	G	Chicago (Illinois)	Federal Reserve Bank of Chicago (English) Russian	http://www.chicagofed.org
8	H	St. Louis (Missouri)	Federal Reserve Bank of St. Louis (English) Russian	http://www.stlouisfed.org
9	I	Minneapolis (Minnesota)	Federal Reserve Bank of Minneapolis	http://www.minneapolisfed.org
10	J	Kansas City (Missouri)	Federal Reserve Bank of Kansas City (English) Russian	http://www.kansascityfed.org
11	K	Dallas (Texas)	Federal Reserve Bank of Dallas (English) Russian	http://www.dallasfed.org
12	L	San Francisco (California)	Federal Reserve Bank of San Francisco	http://www.frbsf.org

Functions of regional branches of the Federal Reserve System:

set discount rates with the permission of the Federal Reserve Board of Governors;
monitor the health of local economic and financial institutions;
provide financial services to the US government and other depositories.

Federal Open Market Committee

Organizationally located between the Board of Governors of the Federal Reserve and the regional branches of the Federal Reserve is the Federal Open Market Committee (FOMC), which is the key body in charge of monetary policy. Its decisions are aimed at stimulating economic growth while maintaining price and monetary stability.

The Federal Open Market Committee consists of 12 members:

7 members of the Federal Reserve Board of Governors
4 members from among the presidents of the Federal Reserve Bank - elected for one year on a rotational basis. The rotation is that each year the Federal Reserve Board of Governors elects one member from among the Fed Presidents in each of four groups:

Boston, Philadelphia (English) Russian, and Richmond (English) Russian
Cleveland (English) Russian and Chicago (English) Russian
Atlanta (English) Russian, St. Louis (English) Russian, and Dallas (English) Russian
Minneapolis, Kansas City (English) Russian, and San Francisco

President of the New York Fed serves on a permanent basis. The post of President of the Board of Governors of the Federal Reserve Bank of New York is considered to be the second most important position in the Fed's leadership structure. In the administration of the 44th US President Barack Obama, the post of 75th Secretary of the Treasury was taken by Timothy Geithner, who previously headed the Federal Reserve Bank of New York.

Non-voting Federal Reserve Presidents attend Committee meetings and participate in discussions and assessments of the economy and possible development options. Minutes of committee meetings are regularly published on the Fed's official website. The calendar of meetings and the time of publication of minutes are known in advance and are significant financial news.

Member banks

Any commercial bank that meets the requirements of the Federal Reserve System can become an owner (shareholder) of a local regional branch.

The number of national banks is 1933 banks, all are members of the Federal Reserve System.
State banks - 5,430 banks, of which 829 banks are members of the Federal Reserve System. Thus, out of 7363 banks, 2762 are members, which is about 38% of the total.

Functions of the Federal Reserve Bank shareholders:

receiving a fixed dividend on FRB shares in exchange for a deposit;
participation in the elections of 6 out of 9 managers of the local regional office (classes A and B).

Features of the Fed as a central bank

Form of ownership of capital

The capital of the Federal Reserve Banks has a joint-stock form of ownership and is formed through the sale of shares of these banks. The main buyers are commercial banks, which do not receive voting rights, but can elect 6 of the 9 managers of the local regional branch, and also receive dividends. In this regard, the United States differs from countries where the capital of the central bank is entirely owned by the state (Great Britain, Canada) or is joint stock with a state share in it (Belgium, Japan).

Federal Reserve Bank shares, received by banks in exchange for reserve capital, have a number of restrictions: they cannot be sold or exchanged, they pay a fixed dividend of 6% per annum, independent of the Federal Reserve's profits.

Operating profit

Current Fed Balance Sheet: Fed Statistical Report Section H.4.1

Independence

Providing broad autonomy to the Federal Reserve in decision-making is combined with accountability and auditability of activities, which must take place within the legally established framework.

According to the Federal Reserve Act, the Fed reports annually to the House of Representatives of the US Congress, and twice a year to the Banking Committee of the US Congress.

The activities of Federal Reserve Banks are audited at least once a year by the US Government Accounting Office or large independent audit firms at the national level. An amendment to the Accounting and Auditing Act 1950, adopted in 1978, regulates the activities of auditors. Thus, audits conducted by the Federal Reserve do not include consideration of actions and decisions related to monetary policy (including transactions with bank loans) and any other transactions authorized by the FOMC. Auditors also do not examine the Fed's open market operations or transactions with foreign governments, banks, or other financial institutions. In 1993, the US Government Accountability Office asked the US Congress to remove restrictions on its audit powers, but Congress refused. In 2009, Congressman Ron Paul initiated legislation, HR 1207 (the Federal Reserve Transparency Act), which aimed to conduct a one-time, full-scale audit of the Fed by the end of 2010. On July 25, 2012, the bill was approved with some amendments by the House of Representatives with a vote of 327 for and 98 against. For a law to be finally passed, it must receive support in the Senate, with both chambers having to reach consensus on the contents of the law.

Money supply in circulation

A report on current indicators of the money supply in circulation is regularly published by the Federal Reserve Board of Governors. It also reflects the dynamics of changes in the main monetary aggregates M2 and M3, of which the main financial and banking indicator of the money supply in circulation is the monetary aggregate M2.

The methodology for calculating indicators is determined by the Federal Reserve System:

Index	Description
M0	The total amount of cash, plus accounts at the central bank that can be exchanged for cash.
M1	M0 + part of M0 as a reserve or cash in storage + demand deposits (“current checking account” from which money is withdrawn from customer checks or “current bank account”, it is possible to issue checks, including those linked to debit plastic cards)) .
M2	M1 + most time deposits, money market deposit accounts (English) Russian, as well as certificates of deposit up to $100,000.
M3	M2 + all other certificates of deposit, Eurodollar deposits and repos.

Data for the M3 aggregate end in March 2006, since the Fed stopped publishing this information, citing the fact that the cost of collecting data is very significant and the information obtained is insignificant. The remaining three monetary aggregates will continue to be published in detail further.

Fractional reserve banking results in a significant excess of the total money supply over the amount of central bank money due to the creation of commercial bank money. For example, in January 2007, the quantity of central bank money was $750.5 billion, while the quantity of commercial bank money (in the M2 aggregate) was $6.33 trillion.

Criticism of the Fed's activities

Both the history of the Federal Reserve Act and the current activities of the Federal Reserve are the subject of various accusations and criticism of the Federal Reserve. (English) Russian.

According to German Gref, a significant role in the onset of the 2008-2009 crisis was played by the “contradictory role of the US Federal Reserve System (FRS). It is simultaneously the center of national emission and the center of emission of the world reserve currency." However, this contradiction was well known long before this crisis. It was formulated back in the early 1960s by Robert Triffin, and since then it has been known in economic literature as Triffin's paradox.
On video "Fed Inspector General Can't Explain Where $9 Trillion Missed" during the hearing (English) Russian on the House Financial Services Committee (English) Russian Congressman Alan Grayson (English) Russian asks Fed Inspector General Elizabeth Coleman about the trillions of dollars lent or spent by the Fed and where exactly it went, and the trillions in off-balance sheet liabilities. Elizabeth Coleman responds that the Inspector General does not know or track where the money is. (Judging by the report of the US Government Accountability Office (GAO), we were talking about loans to primary dealers (PDCF) - overnight loans with collateral, that is, loans for one day, and the total figure was given for two years without taking into account returns