The Board of Governors is the main governing body of the Federal Reserve System. The board comprises seven members. They are generally nominated by the President and are confirmed by the Senate, for a tenure of fourteen years. One term begins every two years, starting on February 1 of even-numbered years. A member who serves an entire tenure cannot get reappointed in the future. Also, a member who completes an unexpired portion of a term can get reappointed. All the terms end on their statutory date, regardless of the date on which the member is sworn in to their respective office. The Board’s main aim is to analyze both the domestic and international economic developments and also to align the Federal Funds Rate with the target set up by the FOMC. The Board also supervises and regulates the operations of the Federal Reserve Banks. They are also responsible for our country’s payments system and they generally overlook and administer most of the consumer credit protection laws of our country.
The twelve regional Federal Reserve Banks were established by Congress, as the operating arms of the nation's central banking system. They essentially carry out the regular, day to day operations like holding the cash reserves of depository institutions and setting the monetary policy. They move the currency and coin into and out of circulation and further, collect and process millions of checks each day. They provide checking accounts for the Treasury, issue and redeem government securities, and act in other ways as a fiscal agent for the Government. The Reserve Banks participate in literally all of the primary activities responsible for the functioning of the Federal Reserve System. Their board of directors come from various commercial financial organizations, which are also a member of the Fed, and also some certain and proficient individuals who represent each of their very own districts. Each President of these banks is appointed by the Board of Governors. Figure 1 shows the regions.
Figure 1: Regional Federal Reserve Banks
The Federal Open Market Committee (FOMC) is the Fed’s monetary policymaking body. It consists of twelve members—the seven members of the Board of Governors of the Federal Reserve System; the president of the Federal Reserve Bank of New York; and four of the remaining eleven Reserve Bank presidents, who serve one-year terms on a rotating basis. It is very much responsible for open market operations. It is scheduled to meet several times a year to discuss whether to maintain or change any current economic policy. Generally, the FOMC sets the targeted Federal Funds Rate. Below is a graph depicting the Federal Funds Rate from the previous years.
Figure 2: Federal Funds Target Rate
The Federal Advisory Council is an organization composed of the representatives elected by the twelve Federal Reserve Banks. Their aim is to deal with all the matters existing within the board’s jurisdiction. The council and the Board of Governors discuss current financial and business conditions and make recommendations for potential policy changes. The council does research for the Board of Governors. The council doesn’t have the authority to make policies, but its input and advice do influence matters that are within the Board of Governors’ jurisdiction.