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{{Short description|Central banking system of the US}}
{{Redirect|The Fed|the Welsh trade union|South Wales Miners' Federation|other uses|The Fed (disambiguation)}}
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{{Use American English|date=February 2016}}
{{Use mdy dates|date=March 2024}}
{{Infobox central bank
| bank_name   = Federal Reserve System
| image_1               = [[File:Seal of the United States Federal Reserve System.svg|150px]]
| image_title_1         = Seal of the Federal Reserve System
| image_2               = [[File:Flag of the United States Federal Reserve.svg|250px]]
| image_title_2         = Flag of the Federal Reserve System
| image_3               = [[File:Marriner S. Eccles Federal Reserve Board Building.jpg|250px]]
| image_title_3         = The [[Eccles Building]] in [[Washington, D.C.]], which serves as the Federal Reserve System's headquarters
| headquarters         = [[Eccles Building]], [[Washington, D.C.]], U.S.
| established          = {{Start date and age|p=y|1913|12|23}}
| governance           = [[Federal Reserve Board of Governors|Board of Governors]]
| key_people           = {{Plainlist|
* [[Jerome Powell]]<br />([[Chair of the Federal Reserve|Chair]])
* [[Philip Jefferson]]<br />([[Vice Chair of the Federal Reserve|Vice Chair]])
* [[Michelle Bowman]]<br />([[Vice Chair of the Federal Reserve#List of Fed vice chairs for supervision|Vice Chair for Supervision]])
 }}
| president            = 
| leader_title         = 
| president2           = 
| leader2_title        = 
| bank_of              = [[United States]]
| currency             = [[United States dollar]]
| currency_iso         = USD
| borrowing_rate       = 4.00%<ref name="fed-discount-window">{{Cite web |title=The Federal Reserve Bank Discount Window & Payment System Risk Website |url=https://www.frbdiscountwindow.org/pages/discount-rates/current-discount-rates |access-date=October 30, 2025 |website=Federal Reserve System}}</ref> <!-- appears as "bank rate" in infobox, should be updated with Discount rate, NOT Federal Funds Rate -->
| website              = {{Official URL}}
| footnotes            = 
| reserve_requirements = [[Reserve requirement#United States|None]]<ref name="fed-zero-rr">{{Cite web |title=Reserve Requirements |url=https://www.federalreserve.gov/monetarypolicy/reservereq.htm |access-date=May 10, 2020 |website=Federal Reserve System}}</ref>
| interest_rate_target = 3.75-4.00%<ref name="fomc-target">{{Cite web |title=Open Market Operations Archive |url=http://www.federalreserve.gov/monetarypolicy/openmarket.htm |access-date=October 30, 2025 |website=Federal Reserve System}}</ref><!-- Should be updated with Federal Funds Rate -->
| deposit_rate         = 3.90%<ref name="interestonreserves">{{Cite web |title=Interest on Required Reserve Balances and Excess Balances |url=http://www.federalreserve.gov/monetarypolicy/reqresbalances.htm |access-date=October 30, 2025 |website=Federal Reserve System}}</ref>
| IOER                 = Yes
| embed                = {{Infobox government agency|child=yes
| child1_agency        = [[Federal Open Market Committee]]
| jurisdiction         = [[Federal government of the United States]]
| keydocument1         = [[Federal Reserve Act]]}}
}}
{{Banking in the United States}}

The '''Federal Reserve System''' (often shortened to the '''Federal Reserve''', or simply '''the Fed''') is the [[central bank]]ing system of the [[United States]]. It was created on December 23, 1913, with the enactment of the [[Federal Reserve Act]], after a series of [[financial panic]]s (particularly the [[panic of 1907]]) led to the desire for central control of the monetary system in order to alleviate financial crises.{{Refn|group=list|name=need|<ref name="mnglass"/><ref name="initial"/><ref>{{Harvnb|BoG|2005 | pp=1–2}}</ref><ref name="FDS-H-04"/><ref name="FDS-H-05"/><ref name="FDS-H-06"/>}} Although an instrument of the U.S. government, the Federal Reserve System considers itself "an independent central bank because its monetary policy decisions do not have to be approved by the president or by anyone else in the executive or legislative branches of government, it does not receive funding appropriated by Congress, and the terms of the members of the board of governors span multiple presidential and congressional terms."<ref name="auto">{{Cite web |title=FAQ |url=http://www.federalreserve.gov/faqs/about_14986.htm |access-date=December 1, 2015 |website=Who Owns the Federal Reserve? |publisher=Board of Governors of the Federal Reserve System}}</ref> Over the years, events such as the [[Great Depression]] in the 1930s and the [[Great Recession]] during the 2000s have led to the expansion of the roles and responsibilities of the Federal Reserve System.<ref name="initial"/><ref>{{Harvnb|BoG|2005 | pp=1}} "It was founded by Congress in 1913 to provide the nation with a safer, more flexible, and more stable monetary and financial system. Over the years, its role in banking and the economy has expanded."; {{Cite book |last=Patrick |first=Sue C. |title=Reform of the Federal Reserve System in the Early 1930s: The Politics of Money and Banking |publisher=Garland |year=1993 |isbn=978-0-8153-0970-3}}</ref>

[[U.S. Congress|Congress]] established three key objectives for [[monetary policy]] in the Federal Reserve Act: maximizing employment, stabilizing prices, and moderating long-term interest rates.<ref>{{Usc|12|225a}}</ref> The first two objectives are sometimes referred to as the Federal Reserve's dual mandate.<ref>{{Cite web |date=January 25, 2012 |title=What is the Federal Reserve's mandate in setting monetary policy? |url=http://www.federalreserve.gov/faqs/money_12848.htm |archive-url=https://web.archive.org/web/20120126185423/http://www.federalreserve.gov/faqs/money_12848.htm |archive-date=January 26, 2012 |access-date=April 30, 2012 |website=Federalreserve.gov |quote=The Congress established two key objectives for monetary policy—maximum employment and stable prices—in the Federal Reserve Act. These objectives are sometimes referred to as the Federal Reserve's dual mandate.}}</ref> Its duties have expanded over the years, and include supervising and [[Bank regulation|regulating banks]], maintaining the stability of the financial system, and providing financial services to [[depository institution]]s, the U.S. government, and foreign official institutions.<ref name="mission">{{Cite web |date=November 6, 2009 |title=FRB: Mission |url=http://www.federalreserve.gov/generalinfo/mission/default.htm |access-date=October 29, 2011 |publisher=Federalreserve.gov}}</ref> The Fed also conducts research into the economy and provides numerous publications, such as the [[Beige Book]] and the [[FRED database]].<ref>{{Cite web |title=What is FRED? {{!}} Getting To Know FRED |url=https://fredhelp.stlouisfed.org/fred/about/about-fred/what-is-fred/ |access-date=2024-09-16 |language=en-US}}</ref>

The Federal Reserve System is composed of several layers. It is governed by the presidentially appointed [[Federal Reserve Board of Governors|board of governors]] or Federal Reserve Board (FRB). Twelve regional [[Federal Reserve Bank]]s, located in cities throughout the nation, regulate and oversee privately owned commercial banks.<ref>{{Harvnb|BoG|2005 | pp=v}} (See [[#Structure|structure]]); {{Cite web |date=n.d. |title=Federal Reserve Districts |url=http://www.federalreserveonline.org/ |access-date=August 29, 2011 |publisher=Federal Reserve Online |archive-date=February 8, 2012 |archive-url=https://web.archive.org/web/20120208153604/http://www.federalreserveonline.org/ |url-status=dead }}; {{Cite web |title=Federal Reserve Board – Advisory Councils |url=https://www.federalreserve.gov/aboutthefed/advisorydefault.htm |archive-url=https://web.archive.org/web/20150413204008/http://www.federalreserve.gov/aboutthefed/advisorydefault.htm |archive-date=April 13, 2015 |website=Board of Governors of the Federal Reserve System }}</ref> Nationally chartered commercial banks are required to hold stock in, and can elect some board members of, the Federal Reserve Bank of their region.

The [[Federal Open Market Committee]] (FOMC) sets monetary policy by adjusting the target for the [[federal funds rate]], which generally influences [[market interest rate]]s and, in turn, US economic activity via the [[monetary transmission mechanism]]. The FOMC consists of all seven members of the board of governors and the twelve regional Federal Reserve Bank presidents, though only five bank presidents vote at a time: the president of the [[New York Fed]] and four others who rotate through one-year voting terms. There are also various advisory councils.{{Refn|group=list|name=pubpriv|<ref name="who_owns_faq">{{Cite web |title=FAQ – Who owns the Federal Reserve? |work=Board of Governors of the Federal Reserve System |url=http://www.federalreserve.gov/faqs/about_14986.htm |access-date=December 1, 2015 |publisher=Federal Reserve website}}</ref><ref>{{Cite magazine |last=Lapidos |first=Juliet |date=September 19, 2008 |title=Is the Fed Private or Public? |url=http://www.slate.com/id/2200411 |magazine=Slate |access-date=August 29, 2011}}</ref><ref>{{Cite web |last=Toma |first=Mark |date=February 1, 2010 |title=Federal Reserve System |url=http://eh.net/encyclopedia/article/toma.reserve |archive-url=https://web.archive.org/web/20110513022656/http://eh.net/encyclopedia/article/toma.reserve |archive-date=May 13, 2011 |access-date=February 27, 2011 |website=EH. Net Encyclopedia |publisher=Economic History Association }}</ref><ref>{{Cite web |title=Federal Reserve System |url=https://eh.net/encyclopedia/federal-reserve-system |website=eh.net}}</ref><ref>{{Cite web |date=March 31, 2008 |title=Who owns the Federal Reserve Bank? |url=http://www.factcheck.org/2008/03/federal-reserve-bank-ownership |access-date=February 26, 2014 |website=FactCheck}}</ref>}} It has a structure unique among central banks, and is also unusual in that the [[United States Department of the Treasury]], an entity outside of the central bank, prints the [[currency]] used.<ref>{{Cite web |date=August 24, 2011 |title=Coins and Currency |url=http://www.treas.gov/topics/currency |archive-url=https://web.archive.org/web/20101203122230/http://www.treas.gov/topics/currency |archive-date=December 3, 2010 |access-date=August 29, 2011 |website=US Dept of Treasury website }}</ref>

The federal government sets the salaries of the board's seven governors, and it receives all the system's annual profits after dividends on member banks' capital investments are paid, and an account surplus is maintained. In 2015, the Federal Reserve earned a net income of $100.2 billion and transferred $97.7 billion to the U.S. Treasury,<ref name="frs bog net income press lease">{{Cite news |date=January 11, 2016 |title=Press Release – Federal Reserve Board announces Reserve Bank income and expense data and transfers to the Treasury for 2015 |work=Board of Governors of the Federal Reserve System |url=http://www.federalreserve.gov/newsevents/press/other/20160111a.htm |access-date=March 12, 2016}}</ref> and 2020 earnings were approximately $88.6 billion with remittances to the U.S. Treasury of $86.9 billion.<ref>{{Cite web |last=<!--Not stated--> |date=March 22, 2021 |title=Press Release – Federal Reserve System publishes annual financial statements |url=https://www.federalreserve.gov/newsevents/pressreleases/other20210322a.htm |access-date=January 4, 2022 |website=www.federalreserve.gov |publisher=Board of Governors of the Federal Reserve System}}</ref> The Federal Reserve [[Criticism of the Federal Reserve|has been criticized]] for its approach to managing [[inflation]], perceived lack of transparency, and its role in economic downturns.<ref>{{Cite web |date=2015-01-27 |title=Taylor: Federal Reserve Monetary and the Financial Crisis: A Reply to Chairman Ben Bernanke – WSJ |work=Wall Street Journal |url=https://www.wsj.com/articles/SB10001424052748703481004574646100272016422 |access-date=2024-08-22 |archive-url=https://web.archive.org/web/20150127185509/https://www.wsj.com/articles/SB10001424052748703481004574646100272016422 |archive-date=January 27, 2015 |last1=Taylor |first1=John B. }}</ref><ref>{{Cite news |date=2024-06-22 |title=The Latest Fed Criticism? Holding on Too Tight |url=https://www.bloomberg.com/news/newsletters/2024-06-22/bloomberg-weekend-reading-the-latest-fed-criticism-holding-on-too-tight |access-date=2024-08-22 |work=Bloomberg.com |language=en}}</ref><ref>{{Cite news |date=2022-05-14 |title=More Than Half of U.S. Wants Fed Curbed or Abolished – Bloomberg |newspaper=Bloomberg |url=https://www.bloomberg.com/news/articles/2010-12-09/more-than-half-of-americans-want-fed-reined-in-or-abolished |access-date=2024-08-22 |archive-url=https://web.archive.org/web/20220514174100/https://www.bloomberg.com/news/articles/2010-12-09/more-than-half-of-americans-want-fed-reined-in-or-abolished |archive-date=May 14, 2022 }}</ref> Figures such as [[Milton Friedman]] and [[Ron Paul]] have argued that its actions, such as [[expansionary policies]] and bailouts, contribute to inflation, [[Economic bubble|asset bubbles]], and [[moral hazard]].<ref name=":0" /><ref>{{Cite news |last=N |last2=P |last3=R |date=2008-09-23 |title=Ron Paul Weighs In On The Financial Catastrophe |url=https://www.npr.org/2008/09/23/94926280/ron-paul-weighs-in-on-the-financial-catastrophe |access-date=2025-10-12 |work=NPR |language=en}}</ref><ref>{{Cite web |last= |first= |date=September 21, 2009 |title=Texas congressman wants to 'End the Fed' |url=https://abcnews.go.com/Business/texas-congressman-end-fed/story?id=8633432 |access-date=2025-10-12 |website=ABC News |language=en}}</ref> Critics have also noted that the shift from the [[Gold standard#In the United States|gold standard]] to [[Fiat money|fiat currency]] has led to long-term inflation and financial instability, with some calling for the [[End the Fed|Fed's abolition]] or greater accountability through audits.<ref name=":1" /><ref>{{Cite news |date=2016-01-11 |title=A brief history of attempts to audit the Fed. (Rand Paul is a latecomer.) |url=https://www.washingtonpost.com/news/monkey-cage/wp/2016/01/11/a-brief-history-of-attempts-to-audit-the-fed-rand-paul-is-a-latecomer/ |access-date=2025-10-12 |work=The Washington Post |language=en-US |issn=0190-8286}}</ref>

== Purpose ==
Before the founding of the Federal Reserve System, the United States underwent several financial crises. A particularly severe crisis in 1907 led Congress to enact the [[Federal Reserve Act]] in 1913. The primary declared motivation for creating the Federal Reserve System was to address [[bank run|banking panics]].<ref name="initial">''Federal Reserve Act'', Section 12, 12 U.S.C. § 261 (1913).</ref> Other stated purposes, are "to furnish an elastic currency, to afford means of rediscounting [[commercial paper]], [and] to establish a more effective supervision of banking in the United States".<ref>{{Cite web |date=May 14, 2003 |title=Federal Reserve Act |url=http://www.federalreserve.gov/GeneralInfo/fract |archive-url=https://web.archive.org/web/20080517044141/http://www.federalreserve.gov/GeneralInfo/fract |archive-date=May 17, 2008 |publisher=Board of Governors of the Federal Reserve System}}</ref> 

Today, the purposes of the Federal Reserve include the responsibilities to:<ref name="mission" /><ref name="BoG 2006 pp=1">{{Harvnb|BoG|2006 | pp=1}}</ref>
* Address the problem of [[bank run|banking panics]]
* Serve as the [[central bank]] for the United States
* Balance private interests of banks and the centralized responsibility of government
** Supervise and regulate banking institutions
** Protect the credit rights of consumers
* Conduct [[monetary policy]] by influencing [[market interest rate]]s to achieve the goals of
** Maximum employment
** Stable prices, interpreted as an [[inflation]] rate of 2 percent per year on average<ref name="goals of MP"/>
** Moderate long-term interest rates
* Maintain the stability of the financial system and contain [[systemic risk]] in financial markets
* Provide financial services to depository institutions, the U.S. government, and foreign official institutions
** Facilitate the exchange of payments among regions and the operation of the nation's payments system
** Respond to local liquidity needs
* Strengthen U.S. standing in the world economy
=== Fractional-reserve bank ===
{{Further|Bank run|Fractional-reserve banking}}

Banks usually invest the majority of the funds received from depositors. However, banking institutions in the United States are required to hold reserves{{Nsmdns}}amounts of currency and deposits in other banks{{Nsmdns}}equal to a fraction of the amount of the bank's deposit liabilities owed to customers. This practice is called [[fractional-reserve banking]]. On rare occasions, too many of the bank's customers will withdraw their savings such that the bank cannot continue operating on its own; this is called a [[bank run]]. Bank runs can lead to a multitude of social and economic problems. The Federal Reserve System was designed as an attempt to prevent or minimize the occurrence of bank runs, and possibly act as a [[lender of last resort]] when a bank run occurs. Many economists, following [[List of Nobel Memorial Prize laureates in Economics|Nobel]] laureate [[Milton Friedman]], believe that the Federal Reserve inappropriately refused to lend money to small banks during the bank runs of 1929; Friedman argued that this contributed to the [[Great Depression]].<ref name="Federal Reserve Board">{{Cite web |last=Bernanke, Ben |date=October 24, 2003 |title=Remarks by Governor Ben S. Bernanke: At the Federal Reserve Bank of Dallas Conference on the Legacy of Milton and Rose Friedman's ''Free to Choose'', Dallas, Texas |url=http://www.federalreserve.gov/boardDocs/Speeches/2003/20031024/default.htm |format=text}}; FRB Speech: [http://www.federalreserve.gov/boarddocs/speeches/2002/20021108/default.htm FederalReserve.gov: Remarks by Governor Ben S. Bernanke, Conference to Honor Milton Friedman, University of Chicago, Nov. 8, 2002]; {{Cite book |last1=Milton Friedman |url=https://books.google.com/books?id=-lCArZfazBkC&q=%22Regarding%20the%20Great%20Depression%20You're%20right%20We%20did%20it%22 |title=The Great Contraction, 1929–1933 |last2=Anna Jacobson Schwartz |publisher=[[Princeton University Press]] |year=2008 |isbn=978-0-691-13794-0 |edition=New |page=247 |chapter=B. Bernanke's speech to M. Friedman}}</ref>

==== Check clearing system ====
Before the establishment of the Federal Reserve, during times of economic uncertainty, some banks refused to [[Cheque clearing|clear checks]] from certain other banks, which led to large-scale [[bank failure]] in the early 20th-century. Hence, a national check-clearing system was created in the Federal Reserve System.<ref>{{Harvnb|BoG|2005 | pp=83}}</ref> The Federal Reserve can physically accept and transport cheques.<ref>{{cite web |title=Check Services Offerings |url=http://frbservices.org/serviceofferings/check/index.html |url-status=dead |archive-url=https://web.archive.org/web/20130325014658/https://www.frbservices.org/serviceofferings/check/index.html |archive-date=2013-03-25 |access-date=2013-03-27}}</ref>

==== Lender of last resort ====
In the United States of America, the Federal Reserve serves as the [[lender of last resort]] to those institutions that cannot obtain credit elsewhere, institutions the collapse of which would have serious implications for the economy. It took over this role from the private sector [[Clearing house (finance)|clearing houses]] which operated during the [[History of central banking in the United States#1837–1862: "Free Banking" Era|Free Banking Era]]. The availability of liquidity is intended to prevent bank runs.<ref>{{Cite web |url=https://www.minneapolisfed.org/glossary.cfm?js=0#l |title=Lender of last resort |publisher=[[Federal Reserve Bank of Minneapolis]] |access-date=May 21, 2010 |archive-date=January 25, 2010 |archive-url=https://web.archive.org/web/20100125071643/http://www.minneapolisfed.org/glossary.cfm?js=0#l |url-status=dead }}; {{Cite SSRN |title=Lender of Last Resort: The Concept in History |last=Humphrey |first=Thomas M. |date=January 1, 1989 |ssrn=2125371}}</ref>

==== Fluctuations ====
Reserve Banks provide liquidity to banks to meet short-term needs stemming from seasonal fluctuations in deposits or unexpected withdrawals through its [[discount window]] and [[Loan|credit operations]]. Longer-term liquidity may also be provided in exceptional circumstances. The rate the Fed charges banks for these loans is called the discount rate (officially the primary credit rate). By making these loans, the Fed serves as a buffer against unexpected day-to-day fluctuations in reserve demand and supply. This contributes to the effective functioning of the banking system, alleviates pressure in the reserves market, and reduces the extent of unexpected movements in the interest rates.<ref name="dfeverydayecon" /> For example, on September 16, 2008, the Federal Reserve Board authorized an $85&nbsp;billion loan to stave off the bankruptcy of international insurance giant [[American International Group]] (AIG).<ref name="Federal Reserve-AIG Press Release-2008-09-16">{{Cite web |date=September 16, 2008 |title=Press Release: Federal Reserve Board, with full support of the Treasury Department, authorizes the Federal Reserve Bank of New York to lend up to $85 billion to the American International Group (AIG) |url=http://www.federalreserve.gov/newsevents/press/other/20080916a.htm |access-date=August 29, 2011 |publisher=Board of Governors of the Federal Reserve}}; {{Cite news |last1=Andrews |first1=Edmund L. |last2=de la Merced |first2=Michael J. |last3=Walsh |first3=Mary Williams |date=September 16, 2008 |title=Fed's $85 Billion Loan Rescues Insurer |work=The New York Times |url=https://www.nytimes.com/2008/09/17/business/17insure.html |access-date=September 17, 2008}}</ref>

=== Central bank ===
{{Further|Central bank}}
[[File:Onedolar2009series.jpg|right|thumb|Obverse of a Federal Reserve [[United States one-dollar bill|$1 note]] issued in 2009]]

As the [[central bank]] of the United States, the Fed serves as a [[Bankers' bank|banker's bank]] and as the government's bank. As the banker's bank, it helps to assure the safety and efficiency of the payments system. As the government's bank or [[fiscal agent]], the Fed processes a variety of financial transactions involving trillions of dollars. The [[U.S. Treasury]] keeps a checking account with the Federal Reserve, through which incoming federal tax deposits and outgoing government payments are handled. As part of this service relationship, the Fed sells and redeems [[Treasury security|U.S. government securities]] such as savings bonds and Treasury bills, notes and bonds. It also issues the nation's [[Coins of the United States dollar|coin]] and [[Federal Reserve note|paper currency]]. The U.S. Treasury, through its [[Bureau of the Mint]] and [[Bureau of Engraving and Printing]], actually produces the nation's cash supply and, in effect, sells the paper currency to the Federal Reserve Banks at manufacturing cost, and the coins at face value. The Federal Reserve Banks then distribute it to other financial institutions in various ways.<ref name="Fed_currency">{{Cite web |date=June 2008 |title=How Currency Gets into Circulation |url=http://www.newyorkfed.org/aboutthefed/fedpoint/fed01.html |access-date=August 29, 2011 |publisher=Federal Reserve Bank of New York}}</ref> During the [[Fiscal Year]] 2020, the Bureau of Engraving and Printing delivered 57.95&nbsp;billion notes at an average cost of 7.4 cents per note.<ref>{{Cite web |title=Annual Production Reports {{!}} Engraving & Printing |url=https://www.bep.gov/currency/production-figures/annual-production-reports |access-date=January 6, 2023 |website=www.bep.gov}}</ref><ref>{{Cite web |last=Board of Governors of the Federal Reserve System |date=2021 |title=2021 Currency Budget |url=https://www.federalreserve.gov/foia/files/2021currency.pdf |publisher=federalreserve.gov}}</ref>

==== Federal funds ====
{{Main|Federal funds}}

Federal funds, officially [[Federal Reserve Deposits]], are the reserve balances that private banks keep at their local Federal Reserve Bank.<ref>{{Cite web |date=August 2007 |title=Federal Funds |url=http://www.newyorkfed.org/aboutthefed/fedpoint/fed15.html |access-date=August 29, 2011 |publisher=Federal Reserve Bank of New York }}; {{Cite web |year=1993 |editor-last=Cook |editor-first=Timothy Q. |editor2-last=Laroche |editor2-first=Robert K. |title=Instruments of the Money Market |url=http://www.richmondfed.org/publications/research/special_reports/instruments_of_the_money_market/pdf/full_publication.pdf |access-date=August 29, 2011 |publisher=Federal Reserve Bank of Richmond |archive-date=March 25, 2009 |archive-url=https://web.archive.org/web/20090325045301/http://www.richmondfed.org/publications/research/special_reports/instruments_of_the_money_market/pdf/full_publication.pdf |url-status=dead }}</ref> These balances are the namesake reserves of the Federal Reserve System. The purpose of keeping funds at a Federal Reserve Bank is to have a mechanism for private banks to lend funds to one another. This market for funds plays an important role in the Federal Reserve System as it is the basis for its [[monetary policy]] work. Monetary policy is put into effect partly by influencing how much interest the private banks charge each other for the lending of these funds. Federal reserve accounts contain federal reserve credit, which can be converted into [[federal reserve note]]s.{{Citation needed|date=September 2025}}

=== Bank regulator ===
The Federal Reserve regulates private banks. The system was designed out of a compromise between the competing philosophies of privatization and government regulation. In 2006 [[Donald L. Kohn]], vice chairman of the board of governors, summarized the history of this compromise:<ref>{{Cite web |date=November 3, 2006 |title=Speech – Kohn, The Evolving Role of the Federal Reserve Banks |url=http://www.federalreserve.gov/newsevents/speech/kohn20061103a.htm |access-date=August 29, 2011 |publisher=Federalreserve.gov}}</ref>

{{Blockquote|Agrarian and progressive interests, led by William Jennings Bryan, favored a central bank under public, rather than banker, control. However, the vast majority of the nation's bankers, concerned about government intervention in the banking business, opposed a central bank structure directed by political appointees.

The legislation that Congress ultimately adopted in 1913 reflected a hard-fought battle to balance these two competing views and created the hybrid public-private, centralized-decentralized structure that we have today.}}

In the structure of the Federal Reserve System, private banks elect members of the board of directors at their regional Federal Reserve Bank while the members of the board of governors are selected by the [[president of the United States]] and confirmed by the [[United States Senate]].{{Citation needed|date=September 2025}}

==== Government regulation and supervision ====
[[File:House Financial Services Committee hearing with Ben Bernanke.jpg|thumb|right|[[Ben Bernanke]] (lower right), former chairman of the Federal Reserve Board of Governors, at a [[House Financial Services Committee]] hearing on February 10, 2009. Members of the board frequently testify before congressional committees such as this one. The Senate equivalent of the House Financial Services Committee is the [[Senate Committee on Banking, Housing, and Urban Affairs]].]]

The Board of Governors of the Federal Reserve System has a number of supervisory and regulatory responsibilities in the U.S. banking system, but not complete responsibility. A general description of the types of regulation and supervision involved in the U.S. banking system is given by the Federal Reserve:<ref>{{Harvnb|BoG|2005|pp=4–5}}</ref>

{{Blockquote|The Board also plays a major role in the supervision and regulation of the U.S. banking system. It has supervisory responsibilities for state-chartered banks<ref>See example: {{Cite web |date=March 31, 2009 |title=Advantages of Being/Becoming a State Chartered Bank |url=http://www.state.ar.us/bank/benefits_advantages.html |access-date=August 29, 2011 |publisher=Arkansas State Bank Department |df=mdy-all}}</ref> that are members of the Federal Reserve System, [[bank holding companies]] (companies that control banks), the foreign activities of member banks, the U.S. activities of foreign banks, and [[Edge Act]] and "agreement corporations" (limited-purpose institutions that engage in a foreign banking business). The Board and, under delegated authority, the Federal Reserve Banks, supervise approximately 900 state member banks and 5,000 bank holding companies. Other federal agencies also serve as the primary federal supervisors of commercial banks; the [[Office of the Comptroller of the Currency]] supervises national banks, and the [[Federal Deposit Insurance Corporation]] supervises [[State bank (United States)|state bank]]s that are not members of the Federal Reserve System.

Some regulations issued by the Board apply to the entire banking industry, whereas others apply only to member banks, that is, [[State bank (United States)|state bank]]s that have chosen to join the Federal Reserve System and national banks, which by law must be members of the System. The Board also issues regulations to carry out major federal laws governing [[Consumer protection|consumer credit protection]], such as the [[Truth in Lending Act|Truth in Lending]], [[Equal Credit Opportunity Act|Equal Credit Opportunity]], and [[Home Mortgage Disclosure Act]]s. Many of these consumer protection regulations apply to various lenders outside the banking industry as well as to banks.

Members of the Board of Governors are in continual contact with other policy makers in government. They frequently testify before [[congressional committee]]s on the economy, [[monetary policy]], [[Bank regulation|banking supervision and regulation]], [[Consumer protection|consumer credit protection]], [[financial market]]s, and other matters.

The Board has regular contact with members of the President's [[Council of Economic Advisers]] and other key economic officials. The Chair also meets from time to time with the [[President of the United States]] and has regular meetings with the [[Secretary of the Treasury]]. The Chair has formal responsibilities in the international arena as well.}}The Federal Banking Agency Audit Act, enacted in 1978 as Public Law 95-320 and 31 U.S.C. section 714 establish that the board of governors of the Federal Reserve System and the Federal Reserve banks may be audited by the [[Government Accountability Office]] (GAO).<ref>{{Cite web |title=Frequently Asked Questions Federal Reserve System |url=http://www.federalreserve.gov/generalinfo/faq/faqfrs.htm |archive-url=https://web.archive.org/web/20100217220435/http://www.federalreserve.gov/generalinfo/faq/faqfrs.htm |archive-date=February 17, 2010 |access-date=February 19, 2010 |quote=The Board of Governors, the Federal Reserve Banks, and the Federal Reserve System as a whole are all subject to several levels of audit and review. Under the Federal Banking Agency Audit Act, the Government Accountability Office (GAO) has conducted numerous reviews of Federal Reserve activities}}</ref> The GAO has authority to audit check-processing, currency storage and shipments, and some regulatory and bank examination functions – though there are restrictions to what the GAO may audit.<ref>{{Cite web |date=July 26, 1996 |title=Federal Reserve System Current and Future Challenges Require System-wide Attention: Statement of Charles A. Bowsher |url=http://www.gao.gov/archive/1996/gg96159t.pdf |url-status=dead |archive-url=https://web.archive.org/web/20110709123554/http://www.gao.gov/archive/1996/gg96159t.pdf |archive-date=July 9, 2011 |access-date=August 29, 2011 |publisher=United States General Accounting Office}}</ref> 

===== Regulatory and oversight responsibilities =====
The board of directors of each Federal Reserve Bank District also has regulatory and supervisory responsibilities. If the board of directors of a district bank has judged that a member bank is performing or behaving poorly, it will report this to the board of governors. This policy is described in law:

{{Blockquote|Each Federal reserve bank shall keep itself informed of the general character and amount of the loans and investments of its member banks with a view to ascertaining whether undue use is being made of bank credit for the speculative carrying of or trading in securities, real estate, or commodities, or for any other purpose inconsistent with the maintenance of sound credit conditions; and, in determining whether to grant or refuse advances, rediscounts, or other credit accommodations, the Federal reserve bank shall give consideration to such information. The chairman of the Federal reserve bank shall report to the Board of Governors of the Federal Reserve System any such undue use of bank credit by any member bank, together with his recommendation. Whenever, in the judgment of the Board of Governors of the Federal Reserve System, any member bank is making such undue use of bank credit, the Board may, in its discretion, after reasonable notice and an opportunity for a hearing, suspend such bank from the use of the credit facilities of the Federal Reserve System and may terminate such suspension or may renew it from time to time.<ref>{{Cite web |date=June 22, 2010 |title=U.S. Code Title 12, Chapter 3, Subchapter 7, Section 301. Powers and duties of board of directors; suspension of member bank for undue use of bank credit |url=https://www.law.cornell.edu/uscode/text/12/301- |access-date=August 29, 2011 |publisher=Law.cornell.edu}}</ref>}}

=== National payments system ===
In the [[Depository Institutions Deregulation and Monetary Control Act]] of 1980, Congress reaffirmed that the Federal Reserve should promote an efficient nationwide [[Payment system|payments system]]. The act subjects all depository institutions, not just member commercial banks, to reserve requirements and grants them equal access to Reserve Bank payment services. The twelve Federal Reserve Banks provide banking services to depository institutions and to the federal government. For depository institutions, they maintain accounts and provide various payment services, including collecting checks, electronically transferring funds, and distributing and receiving currency and coin. For the federal government, the Reserve Banks act as fiscal agents, paying Treasury checks; processing electronic payments; and issuing, transferring, and redeeming U.S. government securities.<ref>{{Harvnb|BoG|2005 | pp=83–85}}</ref>

The Federal Reserve plays a role in the nation's retail and wholesale payments systems by providing financial services to depository institutions. Retail payments are generally for relatively small-dollar amounts and often involve a depository institution's retail clients. The Reserve Banks' [[Retail banking|retail banking services]] include distributing currency and coin, collecting checks, electronically transferring funds through [[FedACH]] (the Federal Reserve's [[automated clearing house]] system), and beginning in 2023, facilitating [[instant payment]]s using the [[FedNow]] service. The Reserve Banks' [[Wholesale banking|wholesale banking services]] include electronically transferring funds through the [[Fedwire|Fedwire Funds Service]] and transferring securities issued by the U.S. government, its agencies, and certain other entities through the [[Fedwire Securities Service]]. Unlike retail services, wholesale payments are generally for large-dollar amounts and often involve a depository institution's large corporate customers or counterparties.<ref>{{cite web |title=A glossary of terms used in payments and settlement systems |url=https://www.bis.org/cpmi/glossary_030301.pdf |publisher=Bank for International Settlements / Committee on Payments and Market Infrastructures |date=2003 |accessdate=14 November 2025}}</ref>
[[File:FederalReserve System.png|thumb|right|upright=2|Organization of the Federal Reserve System]]

== Structure ==
{{Main|Structure of the Federal Reserve System}}
The Federal Reserve System has a "unique structure that is both public and private" and is described as "[[Independent agencies of the United States government|independent within the government]]" rather than "[[Privatization|independent of government]]".<ref name="auto"/><ref>{{Cite web |title=The Role of the Federal Reserve System |url=http://www.clevelandfed.org/For_the_Public/News_and_Media/Speeches/2005/Pianalto_20051005.cfm |archive-url=https://web.archive.org/web/20130315065708/http://clevelandfed.org/For_the_Public/News_and_Media/Speeches/2005/Pianalto_20051005.cfm |archive-date=March 15, 2013 |access-date=June 24, 2013 |website=Innovation and Education: Renewing the Northeast Ohio Economy |publisher=[[Federal Reserve Bank of Cleveland]]}}{{Cite web |title=Who We Are |work=clevelandfed |date=October 21, 2014 |url=https://www.clevelandfed.org/en/about%20us/who%20we%20are.aspx |archive-url=https://web.archive.org/web/20151208042053/https://www.clevelandfed.org/en/about%20us/who%20we%20are.aspx |archive-date=December 8, 2015 |access-date=December 1, 2015}}</ref> The System does not draw upon public funding, and derives its authority and purpose from the [[Federal Reserve Act]], which was passed by Congress in 1913 and is subject to Congressional modification or repeal.<ref name="FRBPhilPubPriv">[http://www.philadelphiafed.org/education/teachers/resources/fed-today/fed-today_lesson-3.pdf "Is The Fed Public Or Private?"] {{Webarchive|url=https://web.archive.org/web/20140630072104/http://www.philadelphiafed.org/education/teachers/resources/fed-today/fed-today_lesson-3.pdf |date=June 30, 2014 }} [[Federal Reserve Bank of Philadelphia]]. Retrieved June 29, 2012.</ref> The four main components of the Federal Reserve System are the board of governors, the Federal Open Market Committee, the twelve regional Federal Reserve Banks, and the member banks throughout the country.

{| class="wikitable sortable"

|-
! District
Number
! Letter
! Federal
Reserve Bank
! width=200 | Branches
! class="unsortable" | Website
! President

|-
| 1
| A
| [[Federal Reserve Bank of Boston|Boston]]
| &nbsp;
| https://www.bostonfed.org
| [[Susan M. Collins (economist)|Susan M. Collins]]

|-
| 2
| B
| [[Federal Reserve Bank of New York|New York City]]
| &nbsp;
| http://www.newyorkfed.org
| [[John C. Williams (economist)|John C. Williams]]

|-
| 3
| C
| [[Federal Reserve Bank of Philadelphia|Philadelphia]]
| &nbsp;
| http://www.philadelphiafed.org
| [[Patrick T. Harker]]

|-
| 4
| D
| [[Federal Reserve Bank of Cleveland|Cleveland]]
| Cincinnati, Ohio<br />Pittsburgh, Pennsylvania
| http://www.clevelandfed.org
| [[Beth M. Hammack]]

|-
| 5
| E
| [[Federal Reserve Bank of Richmond|Richmond]]
| Baltimore, Maryland<br />Charlotte, North Carolina
| http://www.richmondfed.org
| [[Thomas Barkin]]

|-
| 6
| F
| [[Federal Reserve Bank of Atlanta|Atlanta]]
| Birmingham, Alabama<br />Jacksonville, Florida<br />Miami, Florida<br />Nashville, Tennessee<br />New Orleans, Louisiana
| http://www.atlantafed.org/
| [[Raphael Bostic]]

|-
| 7
| G
| [[Federal Reserve Bank of Chicago|Chicago]]
| Detroit, Michigan
| http://www.chicagofed.org
| [[Austan Goolsbee]]

|-
| 8
| H
| [[Federal Reserve Bank of St. Louis|St. Louis]]
| Little Rock, Arkansas<br />Louisville, Kentucky<br />Memphis, Tennessee
| http://www.stlouisfed.org
| [[James B. Bullard]]

|-
| 9
| I
| [[Federal Reserve Bank of Minneapolis|Minneapolis]]
| Helena, Montana
| https://www.minneapolisfed.org
| [[Neel Kashkari]]

|-
| 10
| J
| [[Federal Reserve Bank of Kansas City|Kansas City]]
| Denver, Colorado<br />Oklahoma City, Oklahoma<br />Omaha, Nebraska
| http://www.kansascityfed.org
| [[Jeffrey Schmid]]

|-
| 11
| K
| [[Federal Reserve Bank of Dallas|Dallas]]
| [[Federal Reserve Bank of Dallas El Paso Branch|El Paso, Texas]]<br />[[Federal Reserve Bank of Dallas Houston Branch|Houston, Texas]]<br />[[Federal Reserve Bank of Dallas San Antonio Branch|San Antonio, Texas]]
| http://www.dallasfed.org
| [[Lorie K. Logan]]

|-
| 12
| L
| [[Federal Reserve Bank of San Francisco|San Francisco]]
| Los Angeles, California<br />Portland, Oregon<br />Salt Lake City, Utah<br />Seattle, Washington
| http://www.frbsf.org
| [[Mary C. Daly]]

|}

=== Board of governors ===
{{Main|Federal Reserve Board of Governors}}

The seven-member board of governors is a large federal agency that functions in business oversight by examining national banks.<ref>{{Cite journal |last=Van Loo |first=Rory |date=August 1, 2018 |title=Regulatory Monitors: Policing Firms in the Compliance Era |url=https://scholarship.law.bu.edu/faculty_scholarship/265 |journal=Faculty Scholarship|volume=119 |issue=2 |page=369 }}</ref>'''{{Rp|12,15}}''' It is charged with the overseeing of the 12 District Reserve Banks and setting national monetary policy. It also supervises and regulates the U.S. banking system in general.<ref>{{Usc|12|247}}.</ref> Governors are appointed by the [[president of the United States]] and confirmed by the [[United States Senate|Senate]] for staggered 14-year terms.<ref name="dfeverydayecon">{{Cite web |title=The Federal Reserve, Monetary Policy and the Economy – Everyday Economics |url=http://www.dallasfed.org/educate/everyday/ev4.html |archive-url=https://web.archive.org/web/20071222121916/http://www.dallasfed.org/educate/everyday/ev4.html |archive-date=December 22, 2007 |access-date=August 29, 2011 |publisher=Dallasfed.org }}</ref><ref>{{cite report|url=https://www.dallasfed.org/assets/documents/educate/everyday/ev4.pdf|url-status=dead|archive-url=https://web.archive.org/web/20220523093415/https://www.dallasfed.org/~/media/documents/educate/everyday/ev4.pdf|archive-date=May 23, 2022|title=The Federal Reserve, Monetary Policy and the Economy|work=[[Federal Reserve Bank of Dallas]]|date=May 2006}}</ref> One term begins every two years, on February 1 of even-numbered years, and members serving a full term cannot be renominated for a second term.<ref name=FRB01/> "[U]pon the expiration of their terms of office, members of the Board shall continue to serve until their successors are appointed and have qualified." The law provides for the removal of a member of the board by the president  of the United States "for cause".<ref name="usc12-242">See {{Usc|12|242}}.</ref> The board is required to make an annual report of operations to the Speaker of the U.S. House of Representatives.

The chair and vice chair of the board of governors are appointed by the [[president of the United States]] from among the sitting governors. They both serve a four-year term and they can be renominated as many times as the president chooses, until their terms on the board of governors expire.<ref name="usc12-241">See {{Usc|12|241}}</ref>

==== List of members of the board of governors ====
[[File:Federal Reserve Governors meeting April 2019 (47679887231).jpg|thumb|upright=1.4|Board of governors in April 2019, when two of the seven seats were vacant]]
The current members of the board of governors are:<ref name="FRB01">{{Cite web |date=July 20, 2011 |title=FRB: Board Members |url=http://www.federalreserve.gov/aboutthefed/bios/board/default.htm |access-date=August 29, 2011 |publisher=Federalreserve.gov}}</ref>

{{Current Federal Reserve governors}}

=== Federal Open Market Committee ===
{{Main|Federal Open Market Committee}}

The [[Federal Open Market Committee]] (FOMC) consists of 12 members, seven from the board of governors and five from the regional Federal Reserve Bank presidents, and must obtain consensus on all decisions. The FOMC oversees and sets policy on [[open market operations]], the principal tool of national monetary policy. The FOMC also directs operations undertaken by the Federal Reserve in foreign exchange markets. All Regional Reserve Bank presidents contribute to the committee's assessment of the economy and of policy options, but only the five presidents who are then members of the FOMC vote on policy decisions. The FOMC determines its own internal organization and, by tradition, elects the chair of the board of governors as its chair and the president of the Federal Reserve Bank of New York as its vice chair. Formal meetings typically are held eight times each year in Washington, D.C.<ref>{{Harvnb|BoG|2005 | pp=11–12}}</ref>

There is very strong consensus among economists against politicising the FOMC.<ref name="igmchicago.org">{{Cite web |title=Fed Appointments – IGM Forum |work=IGM Forum |url=http://www.igmchicago.org/surveys/fed-appointments |access-date=May 15, 2019 |archive-date=May 15, 2019 |archive-url=https://web.archive.org/web/20190515030535/http://www.igmchicago.org/surveys/fed-appointments |url-status=dead }}</ref>

=== Federal Advisory Council ===
{{Main|Federal Advisory Council}}

The Federal Advisory Council (FAC) is a statutory body established under the [[Federal Reserve Act]] of 1913 to provide the [[Federal Reserve Board of Governors|Board of Governors]] of the Federal Reserve System with insights and recommendations from the banking industry and regional economic perspectives. Comprising one representative from each of the 12 Federal Reserve Districts, the Council meets at least four times annually in [[Washington, D.C.]] to discuss economic and banking issues and offer advisory opinions to the Board. Each [[Federal Reserve Bank|Federal Reserve Bank’s]] board of directors selects its district’s representative, typically a senior executive from a member bank, ensuring diverse geographic and institutional input.<ref name="initial" />

=== Federal Reserve Banks ===
{{Main|Federal Reserve Bank}}
[[File:Federal Reserve Districts Map - Banks & Branches.png|upright=1.8|right|thumb|Map of the 12 Federal Reserve Districts, with the 12 Federal Reserve Banks marked as black squares, and all Branches within each district (24 total) marked as red circles. The Washington, DC, headquarters is marked with a star. (Also, a 25th branch in Buffalo, NY, was closed in 2008.)]]
[[File:US Federal Reserve Banks collage 1936.jpg|thumb|upright=1.8|The 12 Reserve Banks buildings in 1936]]

There are 12 [[Federal Reserve Bank|Federal Reserve Banks]], each of which is responsible for member banks located in its district. They are located in [[Federal Reserve Bank of Boston|Boston]], [[Federal Reserve Bank of New York|New York]], [[Federal Reserve Bank of Philadelphia|Philadelphia]], [[Federal Reserve Bank of Cleveland|Cleveland]], [[Federal Reserve Bank of Richmond|Richmond]], [[Federal Reserve Bank of Atlanta|Atlanta]], [[Federal Reserve Bank of Chicago|Chicago]], [[Federal Reserve Bank of St. Louis|St. Louis]], [[Federal Reserve Bank of Minneapolis|Minneapolis]], [[Federal Reserve Bank of Kansas City|Kansas City]], [[Federal Reserve Bank of Dallas|Dallas]], and [[Federal Reserve Bank of San Francisco|San Francisco]]. The size of each district was set based upon the population distribution of the United States when the Federal Reserve Act was passed. The charter and organization of each bank is established by law and cannot be altered by the member banks.<ref name="dfeverydayecon" /><ref name="R000107">{{Cite journal |last=Woodward |first=G. Thomas |date=July 31, 1996 |title=Money and the Federal Reserve System: Myth and Reality – CRS Report for Congress, No. 96-672 E |url=http://home.hiwaay.net/~becraft/FRS-myth.htm |journal=Congressional Research Service Library of Congress |access-date=November 23, 2008}}</ref> Each regional bank has a president, who is the chief executive officer of their bank. Each president is nominated by their bank's board of directors, but the nomination is contingent upon approval by the board of governors. Presidents serve five-year terms and may be reappointed.<ref name="FRB_pres">{{Cite web |date=July 20, 2011 |title=Federal Reserve Bank Presidents |url=http://www.federalreserve.gov/aboutthefed/bios/banks/default.htm |access-date=August 29, 2011 |publisher=Federalreserve.gov}}</ref> 

[[File:Member Federal Reserve System plaque.png|thumb|Plaque marking a bank as a member]]

=== Member banks ===

A member bank is a private institution and owns stock in its regional Federal Reserve Bank. All nationally chartered banks hold stock in one of the Federal Reserve Banks. State chartered banks may choose to be members (and hold stock in their regional Federal Reserve bank) upon meeting certain standards. The amount of stock a member bank must own is equal to 3% of its combined capital and surplus.<ref>{{Cite book |url=http://www.federalreserve.gov/aboutthefed/fract.htm |title=Federal Reserve Act |date=December 14, 2010 |publisher=Board of Governors of the Federal Reserve System |chapter=Section 2.3 Subscription to Stock by National Banks |access-date=February 6, 2011 |chapter-url=http://www.federalreserve.gov/aboutthefed/section2.htm}}; {{Cite book |url=http://www.federalreserve.gov/aboutthefed/fract.htm |title=Federal Reserve Act |date=December 14, 2010 |publisher=Board of Governors of the Federal Reserve System |chapter=Section 5.1 Amount of Shares; Increase and Decrease of Capital; Surrender and Cancellation of Stock |access-date=February 6, 2011 |chapter-url=http://www.federalreserve.gov/aboutthefed/section5.htm}}</ref> About 38% of U.S. banks are members of their regional Federal Reserve Bank.<ref name="auto" /><ref>{{Cite web |title=Who owns the Federal Reserve Bank? |url=http://www.factcheck.org/askfactcheck/who_owns_the_federal_reserve_bank.html |archive-url=https://web.archive.org/web/20101026183106/http://www.factcheck.org/askfactcheck/who_owns_the_federal_reserve_bank.html |archive-date=October 26, 2010 |access-date=October 16, 2010}}; {{Cite web |title=Federal Reserve Membership |url=http://www.richmondfed.org/banking/federal_reserve_membership |access-date=April 30, 2012 |publisher=Federal Reserve Bank of Richmond}}</ref>

Holding stock in a Federal Reserve bank is not like owning stock in a publicly traded company. These stocks cannot be sold or traded, and member banks do not control the Federal Reserve Bank as a result of owning this stock. From their Regional Bank, member banks with $10&nbsp;billion or less in assets receive a dividend of 6%, while member banks with more than $10&nbsp;billion in assets receive the lesser of 6% or the current 10-year Treasury auction rate.<ref>{{Cite book |url=http://www.federalreserve.gov/aboutthefed/fract.htm |title=Federal Reserve Act |date=May 24, 2018 |publisher=Board of Governors of the Federal Reserve System |chapter=Section 7 Division of Earnings |access-date=August 23, 2020 |chapter-url=https://www.federalreserve.gov/aboutthefed/section7.htm}}</ref> The remainder of the regional Federal Reserve Banks' profits is given over to the [[United States Treasury Department]]. In 2015, the Federal Reserve Banks made a profit of $100.2&nbsp;billion and distributed $2.5&nbsp;billion in dividends to member banks as well as returning $97.7&nbsp;billion to the U.S. Treasury.<ref name="frs bog net income press lease"/>

=== Accountability ===
An external auditor selected by the audit committee of the Federal Reserve System regularly audits the Board of Governors and the Federal Reserve Banks. The GAO will audit some activities of the Board of Governors. These audits do not cover "most of the Fed's monetary policy actions or decisions, including discount window lending, open-market operations and any other transactions made under the direction of the Federal Open Market Committee" ...[nor may the GAO audit] "dealings with foreign governments and other central banks."<ref>{{Cite news |last=Reddy |first=Sudeep |date=August 31, 2009 |title=What would a federal reserve audit show |work=The Wall Street Journal |url=https://blogs.wsj.com/economics/2009/08/31/what-would-a-federal-reserve-audit-show/tab/article |access-date=August 29, 2011}}</ref>

The annual and quarterly financial statements prepared by the Federal Reserve System conform to a basis of accounting that is set by the Federal Reserve Board and does not conform to [[Generally Accepted Accounting Principles (United States)|Generally Accepted Accounting Principles]] (GAAP) or government [[Cost Accounting Standards]] (CAS). The financial reporting standards are defined in the Financial Accounting Manual for the Federal Reserve Banks.<ref name="AccountingManual">{{Cite web |title=Financial Accounting Manual for Federal Reserve Banks, January 2018 |work=Board of Governors of the Federal Reserve System |url=https://www.federalreserve.gov/aboutthefed/financial-accounting-manual.htm |access-date=September 19, 2018}}</ref> The cost accounting standards are defined in the Planning and Control System Manual.<ref name="AccountingManual"/> {{As of|2012|August|27}}, the Federal Reserve Board has been publishing unaudited financial reports for the Federal Reserve banks every quarter.<ref>{{Cite web |date=August 27, 2012 |title=Federal Reserve Board begins practice of publishing Reserve Bank financial reports on a quarterly basis |url=http://www.federalreserve.gov/newsevents/press/other/20120827a.htm |access-date=November 24, 2012 |publisher=Federal Reserve Bank}}</ref>

On November 7, 2008, [[Bloomberg L.P.]] brought [[Bloomberg L.P. v. Board of Governors of the Federal Reserve System|a lawsuit]] against the board of governors of the Federal Reserve System to force the board to reveal the identities of firms for which it provided guarantees during the [[2008 financial crisis]].<ref>{{Cite news |first=Ryan |last=Chittum |date=August 25, 2009 |title=Bloomberg Wins Its Lawsuit Against the Federal Reserve |work=Columbia Journalism Review |url=https://www.cjr.org/the_audit/bloomberg_wins_its_lawsuit_aga.php |access-date=November 24, 2012}}</ref> Bloomberg, L.P. won at the trial court<ref>Docket entry 31, ''Bloomberg, L.P. v. Board of Governors of the Federal Reserve System'', case no. 1:08-cv-09595-LAP, U.S. District Court for the District of New York.</ref> and the Fed's appeals were rejected at both the [[United States Court of Appeals for the Second Circuit]] and the [[U.S. Supreme Court]]. The data was released on March 31, 2011.<ref>{{Cite news |last1=Bradley |first1=Keoun |first2=Phil |last2=Kuntz |display-authors=etal |title=The Fed's Secret Liquidity Lifelines |work=Bloomberg |url=https://www.bloomberg.com/data-visualization/federal-reserve-emergency-lending/#/overview/?sort=nomPeakValue&group=none&view=peak&position=0&comparelist=&search= |access-date=March 17, 2012 |archive-url=https://web.archive.org/web/20120315072216/https://www.bloomberg.com/data-visualization/federal-reserve-emergency-lending |archive-date=March 15, 2012}}; {{Cite news |last=Torres |first=Craig |date=March 31, 2011 |title=Fed Releases Discount-Window Loan Records Under Court Order |work=Businessweek |url=https://www.bloomberg.com/news/2011-03-31/federal-reserve-releases-discount-window-loan-records-under-court-order.html |access-date=December 20, 2012}}</ref>

== Monetary policy ==
{{Further|Monetary policy of the United States|Fractional-reserve banking}}

The term "[[monetary policy]]" refers to the actions undertaken by a central bank, such as the Federal Reserve, to influence economic activity (the [[Aggregate demand|overall demand]] for goods and services) to help promote national economic goals. The [[Federal Reserve Act of 1913]] gave the Federal Reserve authority to set monetary policy in the United States. The Fed's mandate for monetary policy is commonly known as the dual mandate of promoting maximum employment and stable prices, the latter being interpreted as a stable inflation rate of 2 percent per year on average. The Fed's monetary policy influences economic activity by influencing the general level of [[interest rate]]s in the economy, which again via the [[monetary transmission mechanism]] affects households' and firms' demand for goods and services and in turn employment and inflation.<ref name="goals of MP">{{cite web |title=Federal Reserve Board – Monetary Policy: What Are Its Goals? How Does It Work? |url=https://www.federalreserve.gov/monetarypolicy/monetary-policy-what-are-its-goals-how-does-it-work.htm |website=Board of Governors of the Federal Reserve System |access-date=August 10, 2023 |language=en |date=July 29, 2021}}</ref>[[File:Unemployment vs Inflation vs Inverted yield curve.webp|thumb|upright=1.8|[[Unemployment in the United States|Unemployment]] vs [[United States Consumer Price Index|Inflation]] vs [[Inverted yield curve]]
{{legend-line|#AA4643 solid 3px|Unemployment rate}}
{{legend-line|#89A54E solid 3px|Inflation [[United States Consumer Price Index|CPI]] }}
{{legend-line|#4572A7 solid 3px|10 year [[United States Treasury security|bond]] minus 2 year bond [[Inverted yield curve]] }}
]]

=== Interbank lending ===
The Federal Reserve sets monetary policy by influencing the [[federal funds rate]], which is the rate of interbank lending of [[Federal Reserve Deposits|reserve balances]]. The rate that banks charge each other for these loans is determined in the [[interbank lending market|interbank market]], and the Federal Reserve influences this rate through the "tools" of monetary policy described in the [[Federal Reserve System#Monetary policy|''Tools'' section]] below. The federal funds rate is a short-term interest rate that the FOMC focuses on, which affects the longer-term interest rates throughout the economy. The Federal Reserve explained the implementation of its monetary policy in 2021:

{{Blockquote|The FOMC has the ability to influence the federal funds rate–and thus the cost of short-term interbank credit–by changing the rate of interest the Fed pays on reserve balances that banks hold at the Fed. A bank is unlikely to lend to another bank (or to any of its customers) at an interest rate lower than the rate that the bank can earn on reserve balances held at the Fed. And because overall reserve balances are currently abundant, if a bank wants to borrow reserve balances, it likely will be able to do so without having to pay a rate much above the rate of interest paid by the Fed.<ref name="goals of MP"/>}}

Changes in the target for the federal funds rate affect overall financial conditions through various channels, including subsequent changes in the market interest rates that commercial banks and other lenders charge on short-term and longer-term loans, and changes in [[asset price]]s and in currency [[exchange rate]]s, which again affects [[private consumption]], [[investment]] and [[net export]]. By easening or tightening the stance of monetary policy, i.e. lowering or raising its target for the federal funds rate, the Fed can either spur or restrain growth in the overall US demand for goods and services.<ref name="goals of MP"/>

=== Tools ===
There are four main tools of monetary policy that the Federal Reserve uses to implement its monetary policy:<ref name="Fed">{{cite web |title=The Fed Explained: What the Central Bank Does |url=https://www.federalreserve.gov/aboutthefed/files/the-fed-explained.pdf |website=www.federalreserve.gov |page=42 |publisher=Federal Reserve System Publication |access-date=August 10, 2023 |date=August 2021}}</ref><ref>{{Cite web |title=Federal Reserve Board – Policy Tools |url=https://www.federalreserve.gov/monetarypolicy/policytools.htm |access-date=February 15, 2022 |website=Board of Governors of the Federal Reserve System |language=en}}</ref>

* Interest on reserve balances (IORB)
** Interest paid on funds that banks hold in their reserve balance accounts at their Federal Reserve Bank.<ref>{{cite web |date=August 9, 2023 |title=Interest on Reserve Balances |url=https://www.federalreserve.gov/monetarypolicy/reserve-balances.htm |access-date=August 10, 2023 |website=Board of Governors of the Federal Reserve System |language=en}}</ref> IORB is the primary tool for moving the federal funds rate within the target range.<ref name="Fed" />
* Overnight reverse repurchase agreement (ON RRP) facility
** The Fed's standing offer to many large nonbank financial institutions to deposit funds at the Fed and earn interest. Acts as a supplementary tool for moving the FFR within the target range.<ref name="Fed" />
* [[Open market operations]]
** Purchases and sales of U.S. Treasury and federal agency securities. Used to maintain an ample supply of reserves.<ref name="Fed" />
* [[Discount window]]
** The Fed's lending to banks at the discount rate.<ref>{{cite web |date=July 11, 2023 |title=The Discount Window and Discount Rate |url=https://www.federalreserve.gov/monetarypolicy/discountrate.htm |access-date=August 10, 2023 |website=www.federalreserve.gov |language=en}}</ref> Helps put a ceiling on the FFR.<ref name="Fed" />

==== Federal funds rate ====
{{Further|Federal funds rate}}
[[File:Federal funds rate history and recessions.png|frameless|upright=2.75]]

The Federal Reserve System implements [[monetary policy]] largely by targeting the [[federal funds rate]]. This is the [[interest rate]] that banks charge each other for overnight loans of [[federal funds]], which are the reserves held by banks at the Fed. This rate is actually determined by the market and is not explicitly mandated by the Fed. The Fed therefore tries to align the effective federal funds rate with the targeted rate, mainly by adjusting its IORB rate.<ref name="RIP MM">{{cite web |last1=Ihrig |first1=Jane |last2=Weinbach |first2=Gretchen C. |last3=Wolla |first3=Scott A. |title=Teaching the Linkage Between Banks and the Fed: R.I.P. Money Multiplier |url=https://research.stlouisfed.org/publications/page1-econ/2021/09/17/teaching-the-linkage-between-banks-and-the-fed-r-i-p-money-multiplier |website=research.stlouisfed.org |access-date=August 10, 2023 |language=en |date=September 2021}}</ref> The Federal Reserve System usually adjusts the federal funds rate target by 0.25% or 0.50% at a time.

==== Interest on reserve balances ====

The interest on reserve balances (IORB) is the interest that the Fed pays on funds held by commercial banks in their reserve balance accounts at the individual Federal Reserve System banks. It is an administrated interest rate (i.e. set directly by the Fed as opposed to a [[market interest rate]] which is determined by the forces of supply and demand).<ref name="RIP MM"/> As banks are unlikely to lend their reserves in the FFR market for less than they get paid by the Fed, the IORB guides the effective FFR and is used as the primary tool of the Fed's monetary policy.<ref name="new tools">{{cite web |last1=Ihrig |first1=Jane |last2=Wolla |first2=Scott A. |title=The Fed's New Monetary Policy Tools |url=https://research.stlouisfed.org/publications/page1-econ/2020/08/03/the-feds-new-monetary-policy-tools |website=research.stlouisfed.org |access-date=August 10, 2023 |language=en |date=August 2020}}</ref><ref name="RIP MM"/>

==== Open market operations ====
{{Further|Open market operations}}

Open market operations are done through the sale and purchase of [[United States Treasury securities]], or "Treasurys". The Federal Reserve buys Treasurys both directly and via [[primary dealers]], which have accounts at depository institutions.<ref name="FRB of NY">{{Cite web |date=August 2007 |title=Monetary Policy Implementation |url=https://www.newyorkfed.org/markets/domestic-market-operations/monetary-policy-implementationl |access-date=June 16, 2024 |publisher=New York Federal Reserve Bank}}</ref>

The Federal Reserve's objective for open market operations has varied over the years. During the 1980s, the focus gradually shifted toward attaining a specified level of the [[federal funds rate]] (the rate that banks charge each other for overnight loans of federal funds, which are the reserves held by banks at the Fed), a process that was largely complete by the end of the decade.<ref>{{Cite web |date=January 26, 2010 |title=Monetary Policy, Open Market Operations |url=http://www.federalreserve.gov/fomc/fundsrate.htm |archive-url=https://web.archive.org/web/20010413160651/http://www.federalreserve.gov/fomc/fundsrate.htm |archive-date=April 13, 2001 |access-date=August 29, 2011 |publisher=Federalreserve.gov}}</ref>

Until the [[2008 financial crisis]], the Fed used open market operations as its primary tool to adjust the supply of reserve balances in order to keep the federal funds rate around the Fed's target.<ref>{{cite web |title=Open Market Operations |url=https://www.federalreserve.gov/monetarypolicy/openmarket.htm |website=www.federalreserve.gov |access-date=August 10, 2023 |language=en}}</ref> This regime is also known as a limited reserves regime.<ref name="new tools"/> After the [[2008 financial crisis]], the Federal Reserve has adopted a so-called ample reserves regime where open market operations leading to modest changes in the supply of reserves are no longer effective in influencing the FFR. Instead the Fed uses its administered rates, in particular the IORB rate, to influence the FFR.<ref name="new tools"/><ref name="RIP MM"/> However, open market operations are still an important maintenance tool in the overall framework of the conduct of monetary policy as they are used for ensuring that reserves remain ample.<ref name="new tools"/>

===== Repurchase agreements =====
{{Further|Repurchase agreement}}

To smooth temporary or cyclical changes in the money supply, the desk engages in [[repurchase agreement]]s (repos) with its primary dealers. Repos are essentially secured, short-term lending by the Fed. On the day of the transaction, the Fed deposits money in a primary dealer's reserve account, and receives the promised securities as [[collateral (finance)|collateral]]. When the transaction matures, the process unwinds: the Fed returns the collateral and charges the primary dealer's reserve account for the principal and accrued interest. The term of the repo (the time between settlement and maturity) can vary from 1 day (called an overnight repo) to 65 days.<ref>{{Cite web |date=August 2007 |title=Repurchase and Reverse Repurchase Transactions |url=http://www.ny.frb.org/aboutthefed/fedpoint/fed04.html |access-date=August 29, 2011 |website=Ny.frb.org |publisher=Federal Reserve Bank of New York |archive-date=September 28, 2011 |archive-url=https://web.archive.org/web/20110928031101/http://www.ny.frb.org/aboutthefed/fedpoint/fed04.html |url-status=dead }}</ref>

==== Discount window and discount rate ====
{{Further|Discount window}}

The Federal Reserve System also directly sets the '''discount rate''', which is the interest rate for "discount window lending", overnight loans that member banks borrow directly from the Fed. This rate is generally set at a rate close to 100 [[basis point]]s above the target federal funds rate. The idea is to encourage banks to seek alternative funding before using the "discount rate" option.<ref>Federal Reserve Bank San Francisco( 2004)</ref> The equivalent operation by the [[European Central Bank]] is referred to as the "[[marginal lending facility]]".<ref>{{Cite journal |last=Patricia S. Pollard |date=February 2003 |title=A Look Inside Two Central Banks: The European System of Central Banks and the Federal Reserve System |journal=Federal Reserve Bank of St. Louis Review |volume=85 |issue=2 |pages=11–30 |doi=10.3886/ICPSR01278 |oclc=1569030}}</ref>

Both the discount rate and the federal funds rate influence the [[prime rate]], which is usually about 3 percentage points higher than the federal funds rate.

==== Term Deposit facility ====

The Term Deposit facility is a program through which the Federal Reserve Banks offer interest-bearing [[term deposits]] to eligible institutions.<ref>{{Cite web |title=Federal Reserve Board – Term Deposit Facility |url=https://www.federalreserve.gov/monetarypolicy/tdf.htm |access-date=February 15, 2022 |website=Board of Governors of the Federal Reserve System |language=en}}</ref> It is intended to facilitate the implementation of monetary policy by providing a tool by which the Federal Reserve can manage the aggregate quantity of reserve balances held by depository institutions. Funds placed in term deposits are removed from the accounts of participating institutions for the life of the term deposit and thus drain reserve balances from the banking system. The program was announced December 9, 2009, and approved April 30, 2010, with an effective date of June 4, 2010.<ref>"Reserve Requirements of Depository Institutions Policy on Payment System Risk", [http://www.gpo.gov/fdsys/pkg/FR-2010-05-05/pdf/2010-10483.pdf 75 Federal Register 86 (May 5, 2010), pp. 24384–24389.]</ref> Fed Chair Ben S. Bernanke, testifying before the House Committee on Financial Services, stated that the Term Deposit Facility would be used to reverse the expansion of credit during the Great Recession, by drawing funds out of the money markets into the Federal Reserve Banks.<ref>{{Cite web |title=Testimony before the House Committee on Financial Services regarding "Unwinding Emergency Federal Reserve Liquidity Programs and Implications for Economic Recovery." March 25, 2010. |url=http://financialservices.house.gov/Hearings/hearingDetails.aspx?NewsID=1087 |archive-url=https://web.archive.org/web/20101007044419/http://financialservices.house.gov/Hearings/hearingDetails.aspx?NewsID=1087 |archive-date=October 7, 2010 }}; [http://frwebgate.access.gpo.gov/cgi-bin/useftp.cgi?IPaddress=162.140.64.184&filename=56764.pdf&directory=/diska/wais/data/111_house_hearings GPO Access Serial No. 111–118 Retrieved September 10, 2010]{{Dead link|date=August 2025 |bot=InternetArchiveBot |fix-attempted=yes }}</ref> It would therefore result in increased market interest rates, acting as a brake on economic activity and inflation.<ref>{{Cite web |date=April 30, 2010 |title=Federal Reserve Board approves amendments to Regulation D authorizing Reserve Banks to offer term deposits |url=http://www.federalreserve.gov/newsevents/press/monetary/20100430a.htm |access-date=August 29, 2011 |publisher=Federalreserve.gov}}</ref> The Federal Reserve authorized up to five "small-value offerings" in 2010 as a pilot program.<ref>{{Cite web |date=May 10, 2010 |title=Board authorizes small-value offerings of term deposits under the Term Deposit Facility |url=http://www.federalreserve.gov/newsevents/press/monetary/20100510b.htm |access-date=August 29, 2011 |publisher=Federalreserve.gov}}</ref> After three of the offering auctions were successfully completed, it was announced that small-value auctions would continue on an ongoing basis.<ref>{{Cite web |date=September 8, 2010 |title=Board authorizes ongoing small-value offerings of term deposits under the Term Deposit Facility |url=http://www.federalreserve.gov/newsevents/press/monetary/20100908a.htm |access-date=August 29, 2011 |publisher=Federalreserve.gov}}</ref>

====Quantitative easing (QE) policy====
A little-used tool of the Federal Reserve is the quantitative easing policy.<ref>{{Cite web |date=January 5, 2022 |title=Why Quantitative Tightening Is on the Fed's Agenda Again |url=https://www.bloomberg.com/news/articles/2022-01-05/for-fed-taper-rates-then-quantitative-tightening-quicktake |access-date=April 3, 2022 |website=Bloomberg}}</ref> Under that policy, the Federal Reserve buys back corporate bonds and mortgage backed securities held by banks or other financial institutions. This in effect puts money back into the financial institutions and allows them to make loans and conduct normal business.
The bursting of the [[United States housing bubble]] prompted the Fed to buy mortgage-backed securities for the first time in November 2008. Over six weeks, a total of $1.25&nbsp;trillion were purchased in order to stabilize the housing market, about one-fifth of all U.S. government-backed mortgages.<ref>{{Cite web |date=August 26, 2010 |title=Federal Reserve Mortgage Purchase Program: Planet Money |url=https://www.npr.org/templates/transcript/transcript.php?storyId=129451895 |access-date=August 29, 2011 |publisher=NPR}}</ref>

=== Expired policy tools ===

==== Reserve requirements ====
An instrument of monetary policy adjustment historically employed by the Federal Reserve System was the fractional [[reserve requirement]], also known as the required reserve ratio.<ref>{{Harvnb|BoG|2005 | pp=30}}</ref> The required reserve ratio set the balance that the Federal Reserve System required a depository institution to hold in the Federal Reserve Banks.<ref name="BoG 2005 pp=27">{{Harvnb|BoG|2005 | pp=27}}</ref> The required reserve ratio was set by the board of governors of the Federal Reserve System.<ref>{{Harvnb|BoG|2005 | pp=31}}</ref> The reserve requirements have changed over time and some history of these changes is published by the Federal Reserve.<ref name="hist_resreq">{{Cite journal |last=Feinman |first=Joshua N. |date=June 1993 |title=Reserve Requirements: History, Current Practice, and Potential Reform |url=http://www.federalreserve.gov/monetarypolicy/0693lead.pdf |journal=[[Federal Reserve Bulletin]] |pages=569–589 |access-date=August 29, 2011}}</ref>

As a response to the [[2008 financial crisis]], the Federal Reserve started making interest payments on depository institutions' required and excess reserve balances. The payment of interest on excess reserves gave the central bank greater opportunity to address credit market conditions while maintaining the federal funds rate close to the target rate set by the FOMC.<ref>{{Cite web |date=October 6, 2008 |title=Board announces that it will begin to pay interest on depository institutions required and excess reserve balances |url=http://www.federalreserve.gov/monetarypolicy/20081006a.htm |access-date=August 29, 2011 |publisher=Federal Reserve}}</ref> The reserve requirement did not play a significant role in the post-2008 interest-on-excess-reserves regime,<ref name="fed-zero-rr-pr">{{Cite web |date=March 15, 2020 |title=Federal Reserve Actions to Support the Flow of Credit to Households and Businesses |url=https://www.federalreserve.gov/newsevents/pressreleases/monetary20200315b.htm |access-date=May 10, 2020 |website=Federal Reserve System}}</ref> and in March 2020, the reserve ratio was set to zero for all banks, which meant that no bank was required to hold any reserves, and hence the reserve requirement effectively ceased to exist, though the legal framework exists for it to be reinstated at any time.<ref name="fed-zero-rr"/><ref>Federal Reserve Act, Section 19, 12 U.S.C. § 461</ref>

==== Temporary policy tools during the 2008 financial crisis ====
In order to address problems related to the [[subprime mortgage crisis]] and [[United States housing bubble]], several new tools were created. The first new tool, called the [[Term auction facility]], was added on December 12, 2007. It was announced as a temporary tool,<ref name="taffaq"/> but remained in place for a prolonged period of time.<ref>{{Cite web |date=December 21, 2007 |title=Federal Reserve intends to continue term TAF auctions as necessary |url=http://www.federalreserve.gov/newsevents/press/monetary/20071221b.htm |access-date=August 29, 2011 |publisher=Federalreserve.gov}}</ref> Creation of the second new tool, called the [[Term Securities Lending Facility]], was announced on March 11, 2008.<ref name="tslfannounce">{{Cite web |date=March 11, 2008 |title=Announcement of the creation of the Term Securities Lending Facility |url=http://federalreserve.gov/newsevents/press/monetary/20080311a.htm |access-date=August 29, 2011 |publisher=Federal Reserve}}</ref> The main difference between these two facilities was that the Term auction Facility was used to inject cash into the banking system whereas the Term securities Lending Facility was used to inject [[treasury securities]] into the banking system.<ref>{{Cite news |date=March 12, 2008 |title=Fed Seeks to Limit Slump by Taking Mortgage Debt |publisher=bloomberg.com |url=https://www.bloomberg.com/apps/news?pid=20601103&sid=a6aFI7RKVhEA&refer=news}} "The step goes beyond past initiatives because the Fed can now inject liquidity without flooding the banking system with cash...Unlike the newest tool, the past steps added cash to the banking system, which affects the Fed's benchmark interest rate...By contrast, the TSLF injects liquidity by lending Treasuries, which doesn't affect the federal funds rate. That leaves the Fed free to address the mortgage crisis directly without concern about adding more cash to the system than it wants"</ref> Creation of the third tool, called the [[Primary Dealer Credit Facility]] (PDCF), was announced on March 16, 2008.<ref>{{Cite web |date=March 16, 2008 |title=Federal Reserve Announces Establishment of Primary Dealer Credit Facility – Federal Reserve Bank of New York |url=http://www.newyorkfed.org/newsevents/news/markets/2008/rp080316.html |access-date=August 29, 2011 |publisher=Newyorkfed.org}}</ref> The PDCF was a fundamental change in Federal Reserve policy because it enabled the Fed to lend directly to [[primary dealer]]s, which was previously against Fed policy.<ref>{{Cite news |last=Lanman |first=Scott |date=March 20, 2008 |title=Fed Says Securities Firms Borrow $28.8 Bln With New Financing |publisher=Bloomberg.com |url=https://www.bloomberg.com/apps/news?pid=20601068&sid=a7VHAq.o6kwU |access-date=August 29, 2011}}</ref> The differences between these three facilities was described by the Federal Reserve:<ref name="pdcffaq">{{Cite web |date=February 3, 2009 |title=Primary Dealer Credit Facility: Frequently Asked Questions – Federal Reserve Bank of New York |url=http://www.newyorkfed.org/markets/pdcf_faq.html |access-date=August 29, 2011 |publisher=Newyorkfed.org}}</ref>

{{Blockquote|The Term  auction Facility program offers term funding to depository institutions via a bi-weekly auction, for fixed amounts of credit. The Term  securities Lending Facility will be an auction for a fixed amount of lending of Treasury general collateral in exchange for OMO-eligible and AAA/Aaa rated private-label residential mortgage-backed securities. The Primary Dealer Credit Facility now allows eligible primary dealers to borrow at the existing Discount Rate for up to 120 days.}}

Some measures taken by the Federal Reserve to address the [[2008 financial crisis]] had not been used since the [[Great Depression]].<ref>{{Cite news |date=March 17, 2008 |title=Fed Announces Emergency Steps to Ease Credit Crisis – Economy |publisher=[[CNBC]] |agency=Reuters |url=https://www.cnbc.com/2008/03/17/fed-announces-emergency-steps-to-ease-credit-crisis.html |access-date=August 29, 2011}}</ref>

==== Term auction facility ====
{{Further|Term auction facility}}

The Term auction Facility was a program in which the Federal Reserve auctioned term funds to depository institutions.<ref name="taffaq">{{Cite web |date=January 12, 2009 |title=FRB: Temporary Auction Facility FAQ |url=http://www.federalreserve.gov/monetarypolicy/taffaq.htm |access-date=August 29, 2011 |publisher=Federalreserve.gov}}</ref> The creation of this facility was announced by the Federal Reserve on December 12, 2007, and was done in conjunction with the [[Bank of Canada]], the [[Bank of England]], the [[European Central Bank]], and the [[Swiss National Bank]] to address elevated pressures in short-term funding markets.<ref name="taf">{{Cite news |date=December 12, 2007 |title=Announcement of the creation of the Term Auction Facility – FRB: Press Release – Federal Reserve and other central banks announce measures designed to address elevated pressures in short-term funding markets |publisher=federalreserve.gov |url=http://www.federalreserve.gov/newsevents/press/monetary/20071212a.htm}}</ref> The reason it was created was that banks were not lending funds to one another and banks in need of funds were refusing to go to the discount window. Banks were not lending money to each other because there was a fear that the loans would not be paid back. Banks refused to go to the discount window because it was usually associated with the stigma of bank failure.<ref>{{Cite news |date=February 18, 2008 |title=US banks borrow $50bn via new Fed facility |work=Financial Times |url=https://www.ft.com/content/66db756a-de5d-11dc-9de3-0000779fd2ac |archive-url=https://ghostarchive.org/archive/20221210/http://www.ft.com/cms/s/66db756a-de5d-11dc-9de3-0000779fd2ac.html |archive-date=December 10, 2022 |url-access=subscription |quote=Before its introduction, banks either had to raise money in the open market or use the so-called "discount window" for emergencies. However, last year many banks refused to use the discount window, even though they found it hard to raise funds in the market, because it was associated with the stigma of bank failure}}</ref><ref>{{Cite news |date=January 4, 2008 |title=Fed Boosts Next Two Special Auctions to $30 Billion |publisher=Bloomberg |url=https://www.bloomberg.com/apps/news?pid=20601103&refer=news&sid=aBPbErlft9cI |quote=The Board of Governors of the Federal Reserve System established the temporary Term Auction Facility, dubbed TAF, in December to provide cash after interest-rate cuts failed to break banks' reluctance to lend amid concern about losses related to subprime mortgage securities. The program will make funding from the Fed available beyond the 20 authorized primary dealers that trade with the central bank}}</ref><ref>{{Cite news |date=December 13, 2007 |title=A dirty job, but someone has to do it |work=economist.com |url=http://www.economist.com/displaystory.cfm?story_id=10286586 |access-date=August 29, 2011 |quote=The Fed's discount window, for instance, through which it lends direct to banks, has barely been approached, despite the soaring spreads in the interbank market. The quarter-point cuts in its federal funds rate and discount rate on December 11 were followed by a steep sell-off in the stockmarket...The hope is that by extending the maturity of central-bank money, broadening the range of collateral against which banks can borrow and shifting from direct lending to an auction, the central bankers will bring down spreads in the one- and three-month [[money market]]s. There will be no net addition of liquidity. What the central bankers add at longer-term maturities, they will take out in the overnight market. But there are risks. The first is that, for all the fanfare, the central banks' plan will make little difference. After all, it does nothing to remove the fundamental reason why investors are worried about lending to banks. This is the uncertainty about potential losses from subprime mortgages and the products based on them, and – given that uncertainty – the banks' own desire to hoard capital against the chance that they will have to strengthen their balance sheets.}}</ref><ref>{{Cite news |date=December 13, 2007 |title=Unclogging the system |work=economist.com |url=http://www.economist.com/daily/news/displaystory.cfm?story_id=10278482&top_story=1 |access-date=August 29, 2011}}</ref> Under the Term auction Facility, the identity of the banks in need of funds was protected in order to avoid the stigma of bank failure.<ref name="mwtaf">{{Cite web |last=Robb |first=Greg |date=December 12, 2007 |title=Fed, top central banks to flood markets with cash |url=http://www.marketwatch.com/news/story/fed-top-central-banks-flood/story.aspx?guid=%7b6FAFC482-F8E4-4F23-A021-52DC7DE8938C%7d&print=true&dist=printTop |access-date=August 29, 2011 |publisher=Marketwatch.com}}</ref> [[Central bank liquidity swap|Foreign exchange swap lines]] with the [[European Central Bank]] and [[Swiss National Bank]] were opened so the banks in Europe could have access to [[U.S. dollar]]s.<ref name="mwtaf"/> The final Term Auction Facility auction was carried out on March 8, 2010.<ref>{{cite web |title=Federal Reserve Board – Term Auction Facility |url=https://www.federalreserve.gov/monetarypolicy/taf.htm |website=Board of Governors of the Federal Reserve System |access-date=August 11, 2023 |language=en |date=November 24, 2015}}</ref>

==== Term securities lending facility ====
The Term securities Lending Facility was a 28-day facility that offered Treasury general collateral to the Federal Reserve Bank of New York's primary dealers in exchange for other program-eligible collateral. It was intended to promote liquidity in the financing markets for Treasury and other collateral and thus to foster the functioning of financial markets more generally.<ref name="tslffaq">{{Cite web |title=Term Securities Lending Facility: Frequently Asked Questions |url=http://www.newyorkfed.org/markets/tslf_faq.html |access-date=December 6, 2014 |publisher=Newyorkfed.org}}</ref> Like the Term auction Facility, the TSLF was done in conjunction with the [[Bank of Canada]], the [[Bank of England]], the [[European Central Bank]], and the [[Swiss National Bank]]. The resource allowed dealers to switch debt that was less liquid for U.S. government securities that were easily tradable. The currency swap lines with the [[European Central Bank]] and [[Swiss National Bank]] were increased. The TSLF was closed on February 1, 2010.<ref>{{cite web |title=Federal Reserve Board – Term Securities Lending Facility |url=https://www.federalreserve.gov/monetarypolicy/tslf.htm |website=Board of Governors of the Federal Reserve System |access-date=August 11, 2023 |language=en}}</ref>

==== Primary dealer credit facility ====
The Primary Dealer Credit Facility (PDCF) was an overnight loan facility that provided funding to primary dealers in exchange for a specified range of eligible collateral and was intended to foster the functioning of financial markets more generally.<ref name=pdcffaq/> The PDCF established in 2008 was closed on February 1, 2010, alongside other crisis-era facilities.<ref>{{Cite news |title=Primary Dealer Credit Facility |url=https://www.federalreserve.gov/monetarypolicy/pdcf.htm |archive-url=https://web.archive.org/web/20250315083542/https://www.federalreserve.gov/monetarypolicy/pdcf.htm |archive-date=March 15, 2025 |access-date=2025-04-20 |language=en |url-status=live }}</ref> A new PDCF was introduced in March 2020 in response to COVID-19-related market disruptions, and that facility ceased extending credit in 2021.<ref>{{cite web |title=Federal Reserve Board – Primary Dealer Credit Facility |url=https://www.federalreserve.gov/monetarypolicy/pdcf.htm |website=Board of Governors of the Federal Reserve System |access-date=August 11, 2023 |language=en}}</ref>

==== Asset Backed Commercial Paper Money Market Mutual Fund Liquidity Facility ====
The Asset Backed Commercial Paper Money Market Mutual Fund Liquidity Facility (ABCPMMMFLF) was also called the AMLF. The Facility began operations on September 22, 2008, and was closed on February 1, 2010.<ref>{{Cite web |title=Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility |url=http://www.federalreserve.gov/monetarypolicy/abcpmmmf.htm |access-date=May 27, 2010 |website=Board of Governors of the Federal Reserve System}}</ref> All U.S. depository institutions, bank holding companies (parent companies or U.S. broker-dealer affiliates), or U.S. branches and agencies of foreign banks were eligible to borrow under this facility pursuant to the discretion of the FRBB.

Collateral eligible for pledge under the Facility was required to meet the following criteria:
* was purchased by Borrower on or after September 19, 2008, from a registered investment company that held itself out as a money market mutual fund;
* was purchased by Borrower at the Fund's acquisition cost as adjusted for amortization of premium or accretion of discount on the ABCP through the date of its purchase by Borrower;
* was rated at the time pledged to FRBB, not lower than A1, F1, or P1 by at least two major rating agencies or, if rated by only one major rating agency, the ABCP must have been rated within the top rating category by that agency;
* was issued by an entity organized under the laws of the United States or a political subdivision thereof under a program that was in existence on September 18, 2008; and
* had stated maturity that did not exceed 120 days if the Borrower was a bank or 270 days for non-bank Borrowers.

==== Commercial Paper Funding Facility ====
On October 7, 2008, the Federal Reserve further expanded the collateral it would loan against to include commercial paper using the [[Commercial Paper Funding Facility]] (CPFF). The action made the Fed a crucial source of credit for non-financial businesses in addition to commercial banks and investment firms. Fed officials said they would buy as much of the debt as necessary to get the market functioning again. They refused to say how much that might be, but they noted that around $1.3 trillion worth of commercial paper would qualify. There was $1.61 trillion in outstanding commercial paper, seasonally adjusted, on the market {{As of|2008|October|1|lc=y}}, according to the most recent data from the Fed. That was down from $1.70 trillion in the previous week. Since the summer of 2007, the market had shrunk from more than $2.2 trillion.<ref>{{Cite web |title=Yahoo Finance – Stock Market Live, Quotes, Business & Finance News |url=https://finance.yahoo.com |archive-url=https://web.archive.org/web/20081216044105/http://biz.yahoo.com/ap/081007/financial_meltdown.html |archive-date=December 16, 2008 |website=finance.yahoo.com}}</ref><ref>{{Cite web |title=Yahoo Finance – Stock Market Live, Quotes, Business & Finance News |url=http://biz.yahoo.com/ap/081007/financial_meltdown.html |archive-url=https://web.archive.org/web/20151015224731/http://biz.yahoo.com/ap/081007/financial_meltdown.html |archive-date=October 15, 2015}}</ref> This program lent out a total $738 billion before it was closed. Forty-five out of 81 of the companies participating in this program were foreign firms. Research shows that [[Troubled Asset Relief Program]] (TARP) recipients were twice as likely to participate in the program than other commercial paper issuers who did not take advantage of the TARP bailout. The Fed incurred no losses from the CPFF.<ref>{{Cite SSRN |title=Does Receiving TARP Funds Make it Easier to Roll Your Commercial Paper Onto the Fed? |last=Wilson |first=Linus |last2=Wu |first2=Yan |date=August 22, 2011 |ssrn=1911454}}</ref>

In response to the economic disruptions caused by the COVID-19 pandemic, the Federal Reserve reintroduced the Commercial Paper Funding Facility (CPFF) on March 17, 2020, to support the flow of credit to households and businesses by purchasing eligible commercial paper.<ref>{{Cite news |title=Federal Reserve Board announces establishment of a Commercial Paper Funding Facility (CPFF) to support the flow of credit to households and businesses |url=https://www.federalreserve.gov/newsevents/pressreleases/monetary20200317a.htm |archive-url=https://web.archive.org/web/20250323074335/https://www.federalreserve.gov/newsevents/pressreleases/monetary20200317a.htm |archive-date=March 23, 2025 |access-date=2025-04-20 |work=Board of Governors of the Federal Reserve System |language=en |url-status=live }}</ref> The CPFF was modeled after the 2008 crisis-era facility and aimed to stabilize the commercial paper market.<ref name="Commercial Paper Funding Facility">{{Cite news |title=Commercial Paper Funding Facility |url=https://www.federalreserve.gov/monetarypolicy/cpff.htm |archive-url=https://web.archive.org/web/20250410221418/https://www.federalreserve.gov/monetarypolicy/cpff.htm |archive-date=April 10, 2025 |access-date=2025-04-20 |language=en |url-status=live }}</ref> The facility ceased operations on March 31, 2021, and is not in place as of April 2025.<ref name="Commercial Paper Funding Facility"/>

==== Term Asset-Backed Security Loan Facility ====
The [[Term Asset-Backed Securities Loan Facility]] (TALF) was a temporary program announced on November 25, 2008, and launched in March 2009 by the Federal Reserve in collaboration with the [[United States Department of the Treasury|U.S. Treasury]] to stimulate consumer and business lending. It provided non-recourse loans to investors to purchase [[Asset-backed security|asset-backed securities]] (ABS), such as [[Car finance|auto loans]], [[student loan]]s, and credit card receivables, aiming to enhance liquidity in these markets.<ref>{{Cite news |title=Federal Reserve announces the creation of the Term Asset-Backed Securities Loan Facility (TALF) |url=https://www.federalreserve.gov/newsevents/pressreleases/monetary20081125a.htm |archive-url=https://web.archive.org/web/20250317030219/https://www.federalreserve.gov/newsevents/pressreleases/monetary20081125a.htm |archive-date=March 17, 2025 |access-date=2025-04-20 |work=Board of Governors of the Federal Reserve System |language=en |url-status=live }}</ref> The facility ceased issuing new loans in June 2010 and was fully wound down by 2015.[2] As a significant tool during the 2008 financial crisis, TALF focused on ABS markets rather than direct banking system liquidity, distinguishing it from other crisis-era facilities.<ref>{{Cite news |title=Term Asset-Backed Securities Loan Facility |url=https://www.federalreserve.gov/monetarypolicy/talf.htm |archive-url=https://web.archive.org/web/20250408111946/https://www.federalreserve.gov/monetarypolicy/talf.htm |archive-date=April 8, 2025 |access-date=2025-04-20 |language=en |url-status=live }}</ref>
== History ==
{| class="floatright" cellpadding="3" style="margin:0.2em 0 0.2em 1em; border:1px #bbb solid; border-collapse:collapse; font-size:85%;"

|- style="text-align:center; background:steelblue; white-space: nowrap;"
!colspan=2|<span align="center" style="width:100%; font-size: 1.25em; white-space: nowrap;color:white;padding:.2em;">Timeline of central banking in the United States</span>

|- style="border-bottom:solid 1px;margin-bottom:.2em;width:66%;text-align:left;color:black;font-weight:bold;"
| Dates
| System

|- style="text-align:left; background:#ccc;"
| 1782–1791
| [[Bank of North America]] (de facto, under the [[Confederation Congress]])

|- align=left
| 1791–1811
| [[First Bank of the United States]]

|- style="text-align:left; background:#ccc;"
| 1811–1816
| No central bank

|- align=left
| 1816–1836
| [[Second Bank of the United States]]

|- style="text-align:left; background:#ccc;"
| 1837–1862
| [[Free Banking Era]]

|- align=left
| 1846–1921
| [[Independent Treasury System]]

|- style="text-align:left; background:#ccc;"
| 1863–1913
| [[History of central banking in the United States#1863–1913: National Banks|National Banks]]

|- align=left
| 1913–present
| Federal Reserve System

|- style="text-align:left; background:#ccc;"
!colspan=2|<span style="font-size:92%;">Sources:<ref>{{Cite web |last=Greenspan |first=Chairman Alan |date=May 2, 1998 |title=Our banking history |url=http://www.federalreserve.gov/BoardDocs/Speeches/1998/19980502.htm }}; {{Cite web |title=History of the Federal Reserve |url=http://www.federalreserveeducation.org/about%2Dthe%2Dfed/history |publisher=Federal reserve education.org }} {{Cite book | chapter-url=http://www.bos.frb.org/about/pubs/begin.pdf | title=Historical Beginnings... The Federal Reserve | year=1999 | chapter=Chapter 1. Early Experiments in Central Banking | access-date=June 3, 2007 | archive-date=December 25, 2010 | archive-url=https://web.archive.org/web/20101225064903/http://www.bos.frb.org/about/pubs/begin.pdf | url-status=dead }}</ref></span>

|}

=== Central banking in the United States, 1791–1913 ===
{{Main|History of central banking in the United States}}

The first attempt at a national currency was during the [[American Revolutionary War]]. In 1775, the Continental Congress, as well as the states, began issuing paper currency, calling the bills "[[Early American currency|Continentals]]".<ref>{{Cite web |title=Timeline of U.S. Currency History |url=https://uscurrency.gov/history-american-currency |archive-url=https://web.archive.org/web/20161004114334/https://uscurrency.gov/history-american-currency |archive-date=October 4, 2016 |access-date=June 8, 2016 |publisher=U.S. Currency Education Program}}</ref> The Continentals were backed only by future tax revenue, and were used to help finance the Revolutionary War. Overprinting, as well as British counterfeiting, caused the value of the Continental to diminish quickly. This experience with paper money led the United States to strip the power to issue Bills of Credit (paper money) from a draft of the new Constitution on August 16, 1787,<ref>{{Cite web |title="Mr. Govr. MORRIS moved to strike out "and emit bills on the credit of the U. States" – If the United States had credit such bills would be unnecessary: if they had not, unjust & useless. ... On the motion for striking out N. H. ay. Mas. ay. Ct ay. N. J. no. Pa. ay. Del. ay. Md. no. Va. ay. N. C. ay. S. C. ay. Geo. ay." |url=http://avalon.law.yale.edu/18th_century/debates_816.asp |access-date=April 30, 2012 |publisher=Avalon.law.yale.edu}}</ref> as well as banning such issuance by the various states, and limiting the states' ability to make anything but gold or silver coin legal tender on August 28.<ref>US Constitution Article 1, Section 10. "no state shall ..emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts;"</ref>

In 1791, the government granted the [[First Bank of the United States]] a charter to operate as the U.S. central bank until 1811.<ref name="A Brief History of Our Nation's Paper Money">{{Cite web |last=Flamme |first=Karen |title=1995 Annual Report: A Brief History of Our Nation's Paper Money |url=http://www.frbsf.org/publications/federalreserve/annual/1995/history.html |archive-url=https://web.archive.org/web/20100227093922/http://www.frbsf.org/publications/federalreserve/annual/1995/history.html |archive-date=February 27, 2010 |access-date=August 26, 2010 |publisher=Federal Reserve Bank of San Francisco}}</ref> The First Bank of the United States came to an end under [[President Madison]] when Congress refused to renew its charter. The [[Second Bank of the United States]] was established in 1816, and lost its authority to be the central bank of the U.S. twenty years later under [[President Jackson]] when its charter expired. Both banks were based upon the Bank of England.<ref>{{Cite book |url=https://books.google.com/books?id=EkUTaZofJYEC |title=British Parliamentary reports on international finance: the Cunliffe Committee and the Macmillan Committee reports |publisher=Ayer Publishing |year=1978 |isbn=978-0-405-11212-6 |quote=description of the founding of Bank of England: 'Its foundation in 1694 arose out the difficulties of the Government of the day in securing subscriptions to State loans. Its primary purpose was to raise and lend money to the State and in consideration of this service it received under its Charter and various Act of Parliament, certain privileges of issuing bank notes. The corporation commenced, with an assured life of twelve years after which the Government had the right to annul its Charter on giving one year's notice. Subsequent extensions of this period coincided generally with the grant of additional loans to the State'}}</ref> Ultimately, a third national bank, known as the Federal Reserve, was established in 1913 and still exists to this day.

==== First Central Bank, 1791 and Second Central Bank, 1816 ====
The first U.S. institution with central banking responsibilities was the [[First Bank of the United States]], chartered by Congress and signed into law by President [[George Washington]] on February 25, 1791, at the urging of [[Alexander Hamilton]]. This was done despite strong opposition from [[Thomas Jefferson]] and [[James Madison]], among numerous others. The charter was for twenty years and expired in 1811 under President Madison, when Congress refused to renew it.<ref name="boshistory">{{Cite web |last=Johnson |first=Roger |date=December 1999 |title=Historical Beginnings... The Federal Reserve |url=http://www.bos.frb.org/about/pubs/begin.pdf |access-date=July 23, 2010 |publisher=Federal Reserve Bank of Boston |page=8 |archive-date=December 25, 2010 |archive-url=https://web.archive.org/web/20101225064903/http://www.bos.frb.org/about/pubs/begin.pdf |url-status=dead }}</ref>

In 1816, however, Madison revived it in the form of the [[Second Bank of the United States]]. Years later, early renewal of the bank's charter became the primary issue in the reelection of President [[Andrew Jackson]]. After Jackson, who was opposed to the central bank, was reelected, he pulled the government's funds out of the bank. Jackson was the only President to completely pay off the national debt<ref>{{Cite news |last=Gordon |first=John Steele |date=February 19, 2009 |title=A Short History of the National Debt |work=[[The Wall Street Journal]] |url=https://www.wsj.com/articles/SB123491373049303821 }}</ref> but his efforts to close the bank contributed to the [[Panic of 1837]]. The bank's charter was not renewed in 1836, and it would fully dissolve after several years as a private corporation.

From 1837 to 1862, in the [[Free Banking Era]] there was no formal central bank. From 1846 to 1921, an [[Independent Treasury System]] ruled.
From 1863 to 1913, a system of national banks was instituted by the 1863 [[National Banking Act]] during which a series of bank panics, in [[Panic of 1873|1873]], [[Panic of 1893|1893]], and [[Panic of 1907|1907]] occurred.<ref name="FDS-H-04">{{Cite web |title=Panic of 1907: J.P. Morgan Saves the Day |url=http://www.u-s-history.com/pages/h952.html |access-date=December 6, 2014 |publisher=US-history.com}}</ref><ref name="FDS-H-05">{{Cite web |title=Born of a Panic: Forming the Fed System |url=http://minneapolisfed.org/publications_papers/pub_display.cfm?id=3816 |access-date=December 6, 2014 |publisher=The Federal Reserve Bank of Minneapolis}}</ref><ref name="FDS-H-06">{{Cite web |last=Abigail Tucker |date=October 29, 2008 |title=The Financial Panic of 1907: Running from History |url=http://www.smithsonianmag.com/history/the-financial-panic-of-1907-running-from-history-82176328 |access-date=December 6, 2014 |website=Smithsonian Magazine}}</ref>

==== Creation of Third Central Bank, 1907–1913 ====
{{Main|History of the Federal Reserve System}}

The main motivation for the third central banking system came from the [[Panic of 1907]], which caused a renewed desire among legislators, economists, and bankers for an overhaul of the monetary system.<ref name="FDS-H-04"/><ref name="FDS-H-05"/><ref name="FDS-H-06"/><ref name="herrickpanic">{{Cite journal |last=Herrick |first=Myron |date=March 1908 |title=The Panic of 1907 and Some of Its Lessons |url=https://zenodo.org/record/1448652 |journal=Annals of the American Academy of Political and Social Science |volume=31 |issue=2 |pages=8–25 |doi=10.1177/000271620803100203 |jstor=1010701 |s2cid=144195201 |issn = 0002-7162}}</ref> During the last quarter of the 19th century and the beginning of the 20th century, the United States economy went through a series of [[financial panics]].<ref name="EFlaherty"/> According to many economists, the previous national banking system had two main weaknesses: an [[inelastic]] currency and a lack of liquidity.<ref name="EFlaherty">{{Cite web |last=Flaherty |first=Edward |date=June 16, 1997 |title=A Brief History of Central Banking in the United States |url=http://odur.let.rug.nl/~usa/E/usbank/bank00.htm |archive-url=https://web.archive.org/web/20120728104703/http://odur.let.rug.nl/~usa/E/usbank/bank00.htm |archive-date=July 28, 2012 |access-date=November 17, 2007 |publisher=University of Groningen |location=Netherlands}}</ref> In 1908, Congress enacted the [[Aldrich–Vreeland Act]], which provided for an emergency currency and established the [[National Monetary Commission]] to study banking and currency reform.<ref name="mnwarburg">{{Cite web |last=Whithouse |first=Michael |date=May 1989 |title=Paul Warburg's Crusade to Establish a Central Bank in the United States |url=https://www.minneapolisfed.org/pubs/region/89-05/reg895d.cfm |archive-url=https://web.archive.org/web/20080516102112/http://minneapolisfed.org/pubs/region/89-05/reg895d.cfm |archive-date=May 16, 2008 |access-date=August 29, 2011 |publisher=The Federal Reserve Bank of Minneapolis}}</ref> The National Monetary Commission returned with recommendations which were repeatedly rejected by Congress. A revision crafted during a secret meeting on [[Jekyll Island]] by Senator Aldrich and representatives of the nation's top finance and industrial groups later became the basis of the [[Federal Reserve Act]].<ref>{{Cite web |title=For years members of the Jekyll Island Club would recount the story of the secret meeting and by the 1930s the narrative was considered a club tradition |url=http://www.jekyllislandhistory.com/federalreserve.shtml |archive-url=https://web.archive.org/web/20120611221413/http://www.jekyllislandhistory.com/federalreserve.shtml |archive-date=June 11, 2012 |access-date=April 30, 2012 |publisher=Jekyllislandhistory.com}}; {{Cite web |title=Papers of Frank A.Vanderlip "I wish I could sit down with you and half a dozen others in the sort of conference that created the Federal Reserve Act" |url=http://fraser.stlouisfed.org/chfrs/record.php?id=5653 |access-date=April 30, 2012 |format=PDF}}</ref>

===== Federal Reserve Act, 1913 =====
{{Main|Federal Reserve Act}}

[[File:Fed Reserve.JPG|thumb|upright=1.35|Newspaper clipping, December 24, 1913]]
The head of the bipartisan National Monetary Commission was financial expert and Senate [[Republican Party (United States)|Republican]] leader [[Nelson Aldrich]]. Aldrich set up two commissions – one to study the American monetary system in depth and the other, headed by Aldrich himself, to study the European central banking systems and report on them.<ref name="mnwarburg"/>

In early November 1910, Aldrich met with five well known members of the New York banking community to devise a central banking bill. [[Paul Warburg]], an attendee of the meeting and longtime advocate of central banking in the U.S., later wrote that Aldrich was "bewildered at all that he had absorbed abroad and he was faced with the difficult task of writing a highly technical bill while being harassed by the daily grind of his parliamentary duties".<ref name="Warburg document">{{Cite web |title=Paul Warburg's Crusade to Establish a Central Bank in the United States |url=https://www.minneapolisfed.org/publications_papers/pub_display.cfm?id=3815 |publisher=The Federal Reserve Bank of Minneapolis}}</ref> After ten days of deliberation, the bill, which would later be referred to as the "Aldrich Plan", was agreed upon. It had several key components, including a central bank with a Washington-based headquarters and fifteen branches located throughout the U.S. in geographically strategic locations, and a uniform elastic currency based on gold and commercial paper. Aldrich believed a central banking system with no political involvement was best, but was convinced by Warburg that a plan with no public control was not politically feasible.<ref name="Warburg document"/> The compromise involved representation of the public sector on the board of directors.<ref name="ecresearch">{{Cite web |title=America's Unknown Enemy: Beyond Conspiracy |url=https://www.aier.org/wp-content/uploads/2013/11/EEB198405-REVISED1993.pdf |archive-url=https://web.archive.org/web/20220110165519/https://www.aier.org/wp-content/uploads/2013/11/EEB198405-REVISED1993.pdf |archive-date=January 10, 2022 |publisher=American Institute of Economic Research}}</ref>

Aldrich's bill met much opposition from politicians. Critics charged Aldrich of being biased due to his close ties to wealthy bankers such as [[J. P. Morgan]] and [[John D. Rockefeller Jr.]], Aldrich's son-in-law. Most Republicans favored the Aldrich Plan,<ref name="ecresearch"/> but it lacked enough support in Congress to pass because rural and western states viewed it as favoring the "eastern establishment".<ref name="mnglass">{{Cite web |date=August 1988 |title=Born of a panic: Forming the Federal Reserve System |url=https://www.minneapolisfed.org/pubs/region/88-08/reg888a.cfm |archive-url=https://web.archive.org/web/20080516102508/http://minneapolisfed.org/pubs/region/88-08/reg888a.cfm |archive-date=May 16, 2008 |publisher=The Federal Reserve Bank of Minneapolis }}</ref><ref>{{Cite web |title=Born of a Panic: Forming the Fed System &#124; Federal Reserve Bank of Minneapolis |url=https://www.minneapolisfed.org:443/article/1988/born-of-a-panic-forming-the-fed-system |website=www.minneapolisfed.org}}</ref> In contrast, progressive Democrats favored a reserve system owned and operated by the government; they believed that public ownership of the central bank would end Wall Street's control of the American currency supply.<ref name="ecresearch"/> Conservative Democrats fought for a privately owned, yet decentralized, reserve system, which would still be free of Wall Street's control.<ref name="ecresearch"/>

The original Aldrich Plan was dealt a fatal blow in 1912, when Democrats won the White House and Congress.<ref name="Warburg document"/> Nonetheless, President [[Woodrow Wilson]] believed that the Aldrich plan would suffice with a few modifications. The plan became the basis for the Federal Reserve Act, which was proposed by Senator [[Robert L. Owen|Robert Owen]] in May 1913. The primary difference between the two bills was the transfer of control of the board of directors (called the Federal Open Market Committee in the Federal Reserve Act) to the government.<ref name="mnglass"/><ref name="boshistory"/> The bill passed Congress on December 23, 1913,<ref>{{Cite web |date=December 22, 1913 |title=Congressional Record – House |url=https://www.scribd.com/doc/17411624/Congressional-Record-Dec-22-1913-pg1465 |access-date=August 29, 2011 |publisher=Scribd.com |page=1465}}; {{Cite web |date=December 23, 1913 |title=Congressional Record – Senate |url=https://www.scribd.com/doc/17234309/Congressional-Record-Dec-23-1913 |access-date=August 29, 2011 |publisher=Scribd.com |page=1468}}</ref> on a mostly partisan basis, with most Democrats voting "yea" and most Republicans voting "nay".<ref name="boshistory"/>

The House voted on December 22, 1913, with 298 voting yes to 60 voting no. The Senate voted 43–25 on December 23, 1913.<ref>{{Cite web |title=The Federal Reserve Act of 1913 – A Legislative History |url=http://www.llsdc.org/FRA-LH |access-date=April 30, 2012 |publisher=Llsdc.org}}</ref> President [[Woodrow Wilson]] signed the bill later that day.<ref>{{Cite news |date=December 24, 1913 |title=Affixes His Signature at 6:02&nbsp;pm, Using Four Gold Pens. |work=[[The New York Times]] |url=https://timesmachine.nytimes.com/timesmachine/1913/12/24/100414417.pdf |access-date=April 30, 2012}}</ref>

=== Federal Reserve era, 1913–present ===
{{Main|History of the Federal Reserve}}

Key laws affecting the Federal Reserve have been:<ref>{{Harvnb|BoG|2005 | pp=2}}</ref>
{{Div col}}
* [[Federal Reserve Act]], 1913
* [[Glass–Steagall Act]], 1933
* [[Banking Act of 1935]]
* [[Employment Act of 1946]]
* [[1951 Accord|Federal Reserve-Treasury Department Accord of 1951]]
* [[Bank Holding Company Act of 1956]] and the amendments of 1970
* [[Federal Reserve Reform Act of 1977]]
* [[International Banking Act of 1978]]
* [[Full Employment and Balanced Growth Act]] (1978)
* [[Depository Institutions Deregulation and Monetary Control Act]] (1980)
* [[Financial Institutions Reform, Recovery and Enforcement Act of 1989]]
* [[Federal Deposit Insurance Corporation Improvement Act of 1991]]
* [[Gramm–Leach–Bliley Act]] (1999)
* [[Financial Services Regulatory Relief Act]] (2006)
* [[Emergency Economic Stabilization Act]] (2008)
* [[Dodd–Frank Wall Street Reform and Consumer Protection Act]] (2010)
{{Div end}}The Banking Act of 1935 created the modern structure of the Federal Reserve and placed monetary decisions beyond presidential control, thus enshrining the [[Central bank independence|independence]] of the Federal Reserve.<ref>{{Cite journal |last1=Richardson |first1=Gary |last2=Wilcox |first2=David W. |date=2025 |title=How Congress Designed the Federal Reserve to Be Independent of Presidential Control |journal=Journal of Economic Perspectives |language=en |volume=39 |issue=3 |pages=221–238 |doi=10.1257/jep.20251447 |issn=0895-3309|doi-access=free }}</ref>

== Economic data ==
The Federal Reserve records and publishes large amounts of data, including the Board of Governors' Economic Data and Research page,<ref>{{Cite web |date=August 24, 2011 |title=FRB: Economic Research & Data |url=http://federalreserve.gov/econresdata/default.htm |access-date=August 29, 2011 |publisher=Federalreserve.gov}}</ref> Statistical Releases and Historical Data Page,<ref>{{Cite web |date=May 10, 2010 |title=Statistics: Releases and Historical Data |url=http://www.federalreserve.gov/releases |access-date=August 29, 2011 |publisher=Federalreserve.gov}}</ref> and the St. Louis Fed's FRED (Federal Reserve Economic Data) page.<ref>{{Cite web |date=August 20, 2011 |title=St. Louis Fed: Economic Data – FRED |url=http://research.stlouisfed.org/fred2 |access-date=August 29, 2011 |publisher=Research.stlouisfed.org}}</ref> The [[Federal Open Market Committee|Federal Open Market Committee (FOMC)]] examines many economic indicators prior to determining monetary policy.<ref name="eco_ind">{{Cite web |title=We Apologize |url=https://www.federalreserveeducation.org/pagenotfound?aspxerrorpath=/fed101_html/policy/indicators_print.htm |archive-url=https://web.archive.org/web/20100105064959/http://www.federalreserveeducation.org/fed101_html/policy/indicators_print.htm |archive-date=January 5, 2010 |website=www.federalreserveeducation.org}}</ref> Some economists have criticised the economic data compiled by the Fed. The Fed sponsors much of the monetary economics research in the U.S., and [[Lawrence H. White]] objects that this makes it less likely for researchers to publish findings challenging the status quo.<ref>{{Cite journal |last=White |first=Lawrence H. |date=August 2005 |title=The Federal Reserve System's Influence on Research in Monetary Economics |url=http://econjwatch.org/articles/the-federal-reserve-system-s-influence-on-research-in-monetary-economics |journal=Econ Journal Watch |volume=2 |issue=2 |pages=325–354 |access-date=August 29, 2011}}</ref>

=== Net worth of households and nonprofit organizations ===
[[File:Total Net Worth - Balance Sheet of Households and Nonprofit Organizations 1949-2012.jpg|thumb|upright=2.4|Total Net Worth{{Nsmdns}}Balance Sheet of Households and Nonprofit Organizations 1949–2012]]

The net worth of households and nonprofit organizations in the United States is published by the Federal Reserve in a report titled ''Flow of Funds''.<ref>[http://www.federalreserve.gov/RELEASES/z1/ FRB: Z.1 Release – Flow of Funds Accounts of the United States, Release Dates] See the pdf documents from 1945 to 2007. The value for each year is on page 94 of each document (the 99th page in a pdf viewer) and duplicated on page 104 (109th page in pdf viewer). It gives the total assets, total liabilities, and net worth. This chart is of the net worth.</ref> At the end of the third quarter of fiscal year 2012, this value was $64.8 trillion. At the end of the first quarter of fiscal year 2014, this value was $95.5 trillion.<ref>[http://www.federalreserve.gov/releases/z1/current/z1r-5.pdf Balance Sheet of Households and Nonprofit Organizations] {{Webarchive|url=https://web.archive.org/web/20140811102013/http://www.federalreserve.gov/releases/z1/current/z1r-5.pdf |date=August 11, 2014 }}, June 5, 2014</ref> As of the fourth quarter of 2024, the net worth of households and nonprofit organizations reached $172.7 trillion, driven primarily by gains in corporate equity and real estate values.<ref>Board of Governors of the Federal Reserve System. (2025, March 13). ''Financial Accounts of the United States: Flow of Funds, Balance Sheets, and Integrated Macroeconomic Accounts, Fourth Quarter 2024''. <nowiki>https://www.federalreserve.gov/releases/z1/20250313/</nowiki>.</ref>

=== Money supply ===
{{Further|Money supply}}

The most common measures are named M0 (narrowest), M1, M2, and M3. In the United States they are defined by the Federal Reserve as follows:

{| class="wikitable"

|-
!Measure
!Definition

|-
| M0
| The total of all physical [[currency]], plus accounts at the central bank that can be exchanged for physical currency.

|-
| M1
| M0 + those portions of M0 held as reserves or vault cash + the amount in [[demand account]]s ("checking" or "current" accounts).

|-
| M2
| M1 + most [[savings account]]s, [[money market account]]s, and small denomination time deposits ([[certificates of deposit]] of under $100,000).

|-
| M3
| M2 + all other CDs, deposits of [[eurodollars]] and [[repurchase agreement]]s.

|}

[[File:Components of the United States money supply2.svg|frameless|upright=2]]

The Federal Reserve stopped publishing M3 statistics in March 2006, saying that the data cost a lot to collect but did not provide significantly useful information.<ref name="prxliv">{{Cite web |date=November 10, 2005 |title=Discontinuance of M3 |url=http://www.federalreserve.gov/Releases/h6/discm3.htm |access-date=August 29, 2011 |publisher=Federalreserve.gov}}</ref> The other three money supply measures continue to be provided in detail.
[[File:CPI 1914-2022.webp|thumb|alt=CPI 1914–2022|upright=2|
{{legend|#0076BA |[[Inflation]]}}
{{legend|#EE220C |[[Deflation]]}}
{{legend-line|#1DB100 solid 3px|[[Money supply|M2 money supply]] increases Year/Year}}
]]

=== Personal consumption expenditures price index ===
{{Further|Personal consumption expenditures price index}}

The [[personal consumption expenditures price index]], also referred to as simply the PCE price index, is used as one measure of the value of money. It is a United States-wide indicator of the average increase in prices for all domestic personal consumption. Using a variety of data including [[United States Consumer Price Index]] and [[U.S. Producer Price Index]] prices, it is derived from the largest component of the [[gross domestic product]] in the BEA's [[National Income and Product Accounts]], personal consumption expenditures.

One of the Fed's main roles is to maintain price stability, which means that the Fed's ability to keep a low inflation rate is a long-term measure of their success.<ref>{{Harvnb|BoG|2006 | pp=10}}</ref> Although the Fed is not required to maintain inflation within a specific range, their long run target for the growth of the PCE price index is between 1.5 and 2 percent.<ref>{{Cite web |date=November 9, 2010 |title=Is the Fed's Definition of Price Stability Evolving? |url=http://research.stlouisfed.org/publications/es/10/ES1033.pdf |access-date=February 13, 2011 |publisher=Federal Reserve Bank of St. Louis}}</ref> There has been debate among policy makers as to whether the Federal Reserve should have a specific [[inflation targeting]] policy.<ref>{{Cite web |date=March 25, 2003 |title=Remarks by Governor Ben S. Bernanke – A perspective on inflation targeting |url=http://www.federalreserve.gov/Boarddocs/Speeches/2003/20030325/default.htm |access-date=August 29, 2011 |publisher=Federalreserve.gov}}; {{Cite magazine |date=November 7, 2005 |title=What's The Fuss Over Inflation Targeting? |url=http://www.businessweek.com/magazine/content/05_45/b3958607.htm |magazine=Businessweek.com |archive-url=https://web.archive.org/web/20110728124345/http://www.businessweek.com/magazine/content/05_45/b3958607.htm |archive-date=July 28, 2011 |access-date=August 29, 2011 }}; {{Cite book |last=Bernanke |first=Ben S. |url=http://www.press.uchicago.edu/cgi-bin/hfs.cgi/00/16485.ctl |title=The Inflation-Targeting Debate |publisher=University of Chicago Press |year=2005 |isbn=978-0-226-04471-2 |access-date=August 29, 2011}}; {{Cite book |url=https://press.uchicago.edu/ucp/books/book/chicago/I/bo3534750.html |title=The Inflation-Targeting Debate |series=National Bureau of Economic Research Studies in Business Cycles |publisher=University of Chicago Press |via=press.uchicago.edu}}</ref>

==== Inflation and the economy ====
Most [[mainstream economists]] favor a low, steady rate of inflation.<ref name="econjournalwatch.org">{{Cite book |last=Hummel |first=Jeffrey Rogers |title=Death and Taxes, Including Inflation: the Public versus Economists |date=January 2007 |url=http://econjwatch.org/articles/death-and-taxes-including-inflation-the-public-versus-economists |page=56}}</ref> [[Chief economist]], and advisor to the Federal Reserve, the [[Congressional Budget Office]] and the [[Council of Economic Advisers]],<ref>{{Cite web|url=https://lsa.umich.edu/econ/alumni-friends/economics-leadership-council--elc-/diane-c--swonk.html|title=Diane C. Swonk|publisher=University of Michigan LSA Department of Economics|website=lsa.umich.edu|access-date=October 14, 2022}}</ref><ref>{{Cite web|url=https://www.businesswire.com/news/home/20180108005615/en/Grant-Thornton-names-Diane-Swonk-chief-economist|title=Grant Thornton names Diane Swonk as chief economist|date=January 8, 2018|website=www.businesswire.com|language=en|access-date=February 2, 2019}}</ref> [[Diane C. Swonk]] observed, in 2022, that "From the Fed's perspective, you have to remember inflation is kind of like cancer. If you don't deal with it now with something that may be painful, you could have something that metastasized and becomes much more chronic later on."<ref>[https://www.pbs.org/newshour/show/inflation-remains-stubbornly-high-despite-federal-reserves-efforts-to-stabilize-costs "Inflation remains stubbornly high despite Federal Reserve's efforts to stabilize costs"] Amna Nawaz, [[PBS]], October 13, 2022. Retrieved October 14, 2022.</ref>

Low (as opposed to zero or [[Deflation|negative]]) inflation may reduce the severity of economic [[recession]]s by enabling the labor market to adjust more quickly in a downturn, and reduce the risk that a [[liquidity trap]] prevents [[monetary policy]] from stabilizing the economy.<ref>{{Cite journal |title=Escaping from a Liquidity Trap and Deflation: The Foolproof Way and Others |first=Lars E.O. |last=Svensson |journal=Journal of Economic Perspectives |volume=17 |issue=4 |date=Fall 2003 |pages=145–166|doi=10.1257/089533003772034934 |s2cid=17420811 |doi-access=free }}</ref> The task of keeping the rate of inflation low and stable is usually given to [[monetary authority|monetary authorities]].[[File:US Seasonal Unemployment.svg|thumb|upright=2|United States unemployment rates 1975–2010 showing variance between the fifty states]]

== Budget ==
The Federal Reserve is self-funded. Over 90{{nbsp}}% of Fed revenues come from open market operations, specifically the interest on the portfolio of Treasury securities as well as "capital gains/losses" that may arise from the buying/selling of the securities and their derivatives as part of Open Market Operations. The balance of revenues come from sales of financial services (check and electronic payment processing) and discount window loans.<ref>{{Cite web |title=Demonstrating Knowledge of the Fed |url=http://www.chicagofed.org/education_resources/files/Demonstrating_Knowledge.ppt |archive-url=https://web.archive.org/web/20080528063259/http://www.chicagofed.org/education_resources/files/Demonstrating_Knowledge.ppt |archive-date=May 28, 2008 |publisher=Chicago Federal Reserve |access-date=March 17, 2008}}</ref> 

The Federal Reserve Board creates a budget report once per year for Congress. There are two reports with budget information. The one that lists the complete balance statements with income and expenses, as well as the net profit or loss, is the large report simply titled, "Annual Report". It also includes data about employment throughout the system. The other report, which explains in more detail the expenses of the different aspects of the whole system, is called "Annual Report: Budget Review".<ref name="budget">{{Cite web |date=August 10, 2011 |title=A–Z Listing of Board Publications |url=http://www.federalreserve.gov/boarddocs/rptcongress/default.htm |access-date=August 29, 2011 |publisher=Federalreserve.gov}}</ref>

===Remittance payments to the Treasury===
[[File:Remittances.webp|thumb|upright=2.4|Federal Reserve remittances to the [[United States Treasury|U.S. Treasury]] (annually)]]
[[File:Federal Reserve Remittences to the Treasury.webp|thumb|upright=2.4|Federal Reserve Remittances to the [[United States Treasury|Treasury]] (weekly)]]

The Federal Reserve has been [[remitting]] interest that it has been receiving back to the [[United States Treasury]]. Most of the assets the Fed holds are [[United States Treasury security|U.S. Treasury bonds]] and [[mortgage-backed securities]] that it has been purchasing as part of [[quantitative easing]] since the [[2008 financial crisis]]. In 2022, the Fed started [[quantitative tightening]] (QT) and selling these assets and taking a loss on them in the [[secondary market|secondary]] [[bond market]]. As a result, the nearly $100{{nbsp}}billion that it was remitting annually to the Treasury, is expected to be discontinued during QT.<ref>{{cite news|url=https://www.bloomberg.com/news/articles/2022-10-10/it-s-official-the-fed-s-in-the-red|title=It's Official: The Fed's in the Red|work=Bloomberg|last=Alloway|first=Tracy|date=October 10, 2022}}</ref><ref>{{cite news | url=https://www.ft.com/content/ddc5d867-59fe-4c9b-a588-4066304318b6 |archive-url=https://ghostarchive.org/archive/20221210/https://www.ft.com/content/ddc5d867-59fe-4c9b-a588-4066304318b6 |archive-date=December 10, 2022 |url-access=subscription | title=Are central banks going bankrupt? | newspaper=Financial Times | date=October 10, 2022 |last=Wigglesworth|first=Robin}}</ref>

In 2023, the Federal Reserve reported a net negative income of $114.3 billion.<ref>{{cite web |url=https://www.reuters.com/markets/us/fed-says-official-net-negative-income-was-1143-billion-2023-2024-03-26/ |title=Fed posts record loss of $114.3 billion in 2023 |last=Derby |first=Michael |date=2024-03-26 |website=Macro Matters |publisher=Reuters |access-date=2024-03-27}}</ref> This triggered the creation of a deferred asset liability on the Federal Reserve balance sheet booked as "Interest on Federal Reserve notes due to U.S. Treasury" totaling $133.3 billion.<ref>{{cite journal |last1=Carpenter |first1=Seth |last2=Ihrig |first2=Jane |last3=Klee |first3=Elizabeth |last4=Quinn |first4=Daniel |last5=Boote |first5=Alexander |date=2012-08-01 |title=The Federal Reserve's Balance Sheet and Earnings: A Primer and Projections |url=https://www.ijcb.org/journal/ijcb15q2a7.pdf |journal=Finance and Economics Discussion Series |publisher=Federal Reserve Board |pages=245–246 |access-date=2024-03-27}}</ref> The deferred asset is the amount of net excess revenues the Federal Reserve must realize before remittances can continue. It does not have any impact on the ability of the Federal Reserve to conduct monetary policy or meet its obligations.<ref>{{cite press release |title=Federal Reserve Board releases annual audited financial statements |url=https://www.federalreserve.gov/newsevents/pressreleases/other20240326a.htm |publisher=Board of Governors of the Federal Reserve System |date=2024-03-26 |access-date=2024-03-27}}</ref> The Federal Reserve has estimated the deferred asset will last until mid-2027.<ref>{{cite web |url=https://www.stlouisfed.org/on-the-economy/2023/nov/fed-remittances-treasury-explaining-deferred-asset |title=The Fed's Remittances to the Treasury: Explaining the 'Deferred Asset' |last1=Faria e Castro |first1=Miguel |last2=Jordan-Wood |first2=Samuel |date=2023-11-21 |website=On The Economy Blog |publisher=Federal Reserve Bank of St. Louis |access-date=2024-03-27}}</ref>

== Balance sheet ==
[[File:Federal reserve assets held.webp|thumb|upright=3.4|Federal reserve assets held
{{Legend|#929292|outline=#5E5E5E|Other assets}}
{{Legend|#FFD932|outline=#FFD932|[[US Treasuries]]}}
{{Legend|#00A2FF|outline=#0076BA|[[Mortgage-backed security]]}}
|left]]
[[File:Consolidated Statement of Condition of all Federal Reserve Banks-ASSETS.gif|thumb|upright=2.4|Total combined assets for all 12 Federal Reserve Banks, 2007–2009]]
[[File:Consolidated Statement of Condition of All Federal Reserve Banks-LIABILITIES.png|thumb|upright=2.4|Total combined liabilities for all 12 Federal Reserve Banks, 2007–2009]]

One of the keys to understanding the Federal Reserve is the Federal Reserve balance sheet (or [[Balance sheet|balance statement]]). In accordance with Section 11 of the [[Federal Reserve Act]], the [[board of governors]] of the Federal Reserve System publishes once each week the "Consolidated Statement of Condition of All Federal Reserve Banks" showing the condition of each Federal Reserve bank and a consolidated statement for all Federal Reserve banks. The board of governors requires that excess earnings of the Reserve Banks be transferred to the Treasury as interest on Federal Reserve notes.<ref>{{Cite web |date=June 2009 |title=96th Annual Report 2008 Federal Reserve |url=http://www.federalreserve.gov/boarddocs/rptcongress/annual08/pdf/AR08.pdf |access-date=August 29, 2011 |publisher=Board of Governors of the Federal Reserve System}}; {{Cite web |title=Factors Affecting Reserve Balances of Depository Institutions and Condition Statement of Federal Reserve Banks |url=http://www.federalreserve.gov/releases/h41/Current |access-date=March 20, 2008 |publisher=Federal Reserve}}</ref>

The Federal Reserve releases its balance sheet every Thursday.<ref>{{Cite web |title=The Fed – Factors Affecting Reserve Balances – H.4.1 – Release Dates |url=https://www.federalreserve.gov/releases/h41 |access-date=October 15, 2020 |website=www.federalreserve.gov |language=en}}</ref> Below is the balance sheet {{As of|2021|April|8|lc=y}} (in billions of dollars):

{| cellpadding="5" cellspacing="5" style="float:left;"

|-
| style="vertical-align:top;" |
{| cellpadding="5" cellspacing="0" style="margin:auto; border:1px solid black;border-color:black;border-collapse:collapse;"

|-
! colspan="3" style="background:#ffdead;border-bottom:1px solid black;" | ASSETS:

|-
| Gold Stock
| &nbsp;
| style="text-align:right;" | 11.04

|-
| Special Drawing Rights Certificate Acct.
| &nbsp;
| style="text-align:right;" | 5.20

|-
| Treasury Currency Outstanding (Coin)
| &nbsp;
| style="text-align:right;" | 1.46

|-
| Securities, unamortized premiums and discounts, repurchase agreements, and loans
| &nbsp;
| 7550.43

|-
| {{Space|3}}Securities Held Outright
| &nbsp;
| style="text-align:right;" | 7146.06

|-
| {{Space|6}}[[United States Treasury security|U.S. Treasury Securities]]
| &nbsp;
| style="text-align:right;" | 4959.03

|-
| {{Space|9}}Bills
| &nbsp;
| style="text-align:right;" | 326.04

|-
| {{Space|9}}Notes and Bonds, nominal
| &nbsp;
| style="text-align:right;" | 4251.66

|-
| {{Space|9}}Notes and Bonds, inflation-indexed
| &nbsp;
| style="text-align:right;" | 334.76

|-
| {{Space|9}}Inflation Compensation
| &nbsp;
| style="text-align:right;" | 46.57

|-
| {{Space|6}}[[Agency debt|Federal Agency Debt Securities]]
| &nbsp;
| style="text-align:right;" | 2.35

|-
| {{Space|6}}Mortgage-Backed Securities
| &nbsp;
| style="text-align:right;" | 2184.68

|-
| Unamortized premiums on securities held outright
| &nbsp;
| style="text-align:right;" | 351.11

|-
| Unamortized discounts on securities held outright
| &nbsp;
| style="text-align:right;" | -9.56

|-
|  Repurchase Agreements
| &nbsp;
| style="text-align:right;" | 0

|-
| Loans
| &nbsp;
| style="text-align:right;" | 62.81

|-
| Net portfolio holdings of Commercial Paper Funding Facility II LLC
| &nbsp;
| style="text-align:right;" | 8.56

|-
| Net portfolio holdings of Corporate Credit Facilities LLC
| &nbsp;
| style="text-align:right;" | 25.94

|-
| Net portfolio holdings of MS Facilities LLC (Main Street Lending Program)
| &nbsp;
| style="text-align:right;" | 30.96

|-
| Net portfolio holdings of Municipal Liquidity Facility LLC
| &nbsp;
| style="text-align:right;" | 11.41

|-
| Net portfolio holdings of TALF II LLC
| &nbsp;
| style="text-align:right;" | 5.28

|-
| Items in process of collection
| &nbsp;
| style="text-align:right;" | 0.04

|-
| Bank premises
| &nbsp;
| style="text-align:right;" | 1.91

|-
| [[Central bank liquidity swap]]s
| &nbsp;
| style="text-align:right;" | 0.87

|-
| Foreign currency denominated assets
| &nbsp;
| style="text-align:right;" | 21.37

|-
| Other Assets
| &nbsp;
| style="text-align:right;" | 34.42

|-
! style="text-align:left" | Total Assets
| &nbsp;
! style="text-align:right;" | 7708.88

|}
| style="vertical-align:top;" |
{| cellpadding="5" cellspacing="0" style="float:left; border:1px solid black;border-color:black;border-collapse:collapse;"

|-
! colspan="3" style="background:#ffdead;border-bottom:1px solid black;" | LIABILITIES:

|-
| Federal Reserve notes, net of F.R. Bank holdings
| &nbsp;
| style="text-align:right;" | 2101.19

|-
| Reverse repurchase agreements
| &nbsp;
| style="text-align:right;" | 272.07

|-
| Deposits
| &nbsp;
| style="text-align:right;" | 5234.02

|-
| {{Space|3}}Term deposits held by depository institutions
| &nbsp;
| style="text-align:right;" | 0

|-
| {{Space|3}}Other deposits held by depository institutions
| &nbsp;
| style="text-align:right;" | 3944.06

|-
| {{Space|3}}U.S. Treasury, general account
| &nbsp;
| style="text-align:right;" | 954.97

|-
| {{Space|3}}Foreign official
| &nbsp;
| style="text-align:right;" | 32.25

|-
| {{Space|3}}Other Deposits
| &nbsp;
| style="text-align:right;" | 302.74

|-
| Deferred availability cash items
| &nbsp;
| style="text-align:right;" | 0.15

|-
| Treasury contributions to credit facilities
| &nbsp;
| style="text-align:right;" | 51.78

|-
| Other liabilities and accrued dividends
| &nbsp;
| style="text-align:right;" | 10.40

|-
! style="text-align:left" | Total liabilities
| &nbsp;
! style="text-align:right;" | 7669.62

|}
| style="vertical-align:top;" |
{| cellpadding="5" cellspacing="0" style="float:left; border:1px solid black;border-color:black;border-collapse:collapse;"

|-
! colspan="3" style="background:#ffdead;border-bottom:1px solid black;" | CAPITAL <small>(AKA Net Equity)</small>

|-
| Capital Paid In
| &nbsp;
| style="text-align:right;" | 32.48

|-
| Surplus
| &nbsp;
| style="text-align:right;" | 6.79

|-
| Other Capital
| &nbsp;
| style="text-align:right;" | 0

|-
! style="text-align:left" | Total Capital
| &nbsp;
! style="text-align:right;" | 39.27

|-
! colspan="3" style="background:#ffdead;border:1px solid black;" | MEMO <small>(off-balance-sheet items)</small>

|-
| style="width:100px;" | Marketable securities held in custody for foreign official and international accounts
| &nbsp;
| style="text-align:right;" | 3548.94

|-
| Marketable{{Space|3}}U.S. Treasury Securities
| &nbsp;
| style="text-align:right;" | 3114.90

|-
| Federal agency debt and mortgage-backed securities
| &nbsp;
| style="text-align:right;" | 346.41

|-
| Other securities
| &nbsp;
| style="text-align:right;" | 87.62

|-
| Securities lent to dealers
| &nbsp;
| style="text-align:right;" | 40.45

|-
| {{Space|3}}Overnight
| &nbsp;
| style="text-align:right;" | 40.45

|-
| U.S. Treasury securities
| &nbsp;
| style="text-align:right;" | 40.45

|-
| Federal agency debt securities

| &nbsp;
| style="text-align:right;" | 0

|}

|}
{{Clear}}

In addition, the balance sheet also indicates which assets are held as collateral against [[Federal Reserve Notes]].

{| cellpadding="5" cellspacing="0" style="border:1px solid black;border-color:black;border-collapse:collapse;"
! colspan="3" style="background:#ffdead; border-bottom:1px solid black;"|Federal Reserve Notes and Collateral

|-
| Federal Reserve Notes Outstanding
| &nbsp;
| style="text-align:right;"|2255.55

|-
| {{Space|3}}Less: Notes held by F.R. Banks
| &nbsp;
| style="text-align:right;"|154.35

|-
| {{Space|3}}Federal Reserve notes to be collateralized
| &nbsp;
| style="text-align:right;"|2101.19

|-
| Collateral held against Federal Reserve notes
| &nbsp;
| style="text-align:right;"|2101.19

|-
| {{Space|3}}Gold certificate account
| &nbsp;
| style="text-align:right;"|11.04

|-
| {{Space|3}}Special drawing rights certificate account
| &nbsp;
| style="text-align:right;"|5.20

|-
| {{Space|3}}U.S. Treasury, agency debt, and mortgage-backed securities pledged
| &nbsp;
| style="text-align:right;"|2084.96

|-
| {{Space|3}}Other assets pledged
| &nbsp;
| style="text-align:right;"|0

|}
As of August 2024, the Fed's total assets on balance sheet are $7.139 trillion.<ref>{{Cite web |date=2024-08-22 |title=Assets: Total Assets: Total Assets (Less Eliminations from Consolidation): Wednesday Level |url=https://fred.stlouisfed.org/series/WALCL |access-date=2024-08-27 |website=fred.stlouisfed.org |language=en}}</ref>

== Criticism ==
{{Main|Criticism of the Federal Reserve|Causes of the Great Depression}}
[[File:FFR treasuries.webp|thumb|upright=2.2|
{{legend-line|#F5A623 solid 3px|[[Mortgage loan|30 year mortgage average]]}}
{{legend-line|#F8E71C solid 3px|[[treasury bond|30 Year Treasury Bond]]}}
{{legend-line|#000000 solid 3px| 10 Year Treasury Bond}}
{{legend-line|#9013FE solid 3px| 2 Year Treasury Bond}}
{{legend-line|#4A90E2 solid 3px| 3 month Treasury Bond}}
{{legend-line|#D0021B solid 4px| Effective Federal Funds Rate}}  
{{legend-line|#E786F9 solid 4px| [[United States Consumer Price Index|CPI inflation]] year/year}}
{{color box|lightgrey}} [[List of recessions in the United States|Recessions]]
]]

The Federal Reserve System has faced various criticisms since its inception in 1913. Some of the most common critiques focus on its monetary policy, lack of transparency, and its potential role in exacerbating financial instability.<ref name="bi-ronpaul">{{Cite news |last=Wyler |first=Grace |date=May 8, 2012 |title=Ron Paul Is Hosting A Hearing On Ending The Federal Reserve Right Now |url=http://www.businessinsider.com/ron-paul-end-the-fed-congressional-hearing-2012-5 |publisher=Business Insider Incorporated}}; {{Cite AV media |url=http://www.c-span.org/video/?61272-1/book-discussion-road-serfdom |title=Book Discussion on The Road to Serfdom |date=October 28, 1994 |last=Lamb |first=Brian |publisher=C-SPAN |others=Milton Friedman |transcript-url=http://booknotes.org/FullPage.aspx?SID=61272-1 |transcript=LAMB: What do you think of the Federal Reserve Board today? [Milton] FRIEDMAN: I've long been in favor of abolishing it. There's no institution in the United States that has such a high public standing and such a poor record of performance.}}</ref> Critics argue that the Fed’s expansionary policies—such as lowering interest rates and increasing the money supply—can lead to inflation, asset bubbles, and economic distortions. Prominent economists like [[Milton Friedman]] have criticized the Fed for contributing to economic downturns, including its role in the Great Depression.<ref name=":0">{{Cite web |title=Has Government Any Role in Money? |url=https://www.nber.org/chapters/c7507.pdf}}</ref> [[Libertarianism in the United States|Libertarian]] figures such as [[Ron Paul]] have been especially vocal in calling for greater accountability and transparency within the Fed, advocating for measures such as auditing the Federal Reserve to ensure it serves the public interest rather than benefiting large financial institutions. Additionally, some critics, including [[Rand Paul]], argue that the Fed disproportionately serves the interests of the banking elite, given the backgrounds of many of its officials in finance and banking, leading to potential conflicts of interest and policies that favor [[Wall Street]] over the general economy.

Another area of criticism is the Federal Reserve’s departure from the [[gold standard]] in 1971, which many argue has contributed to long-term inflationary pressures and a devaluation of the U.S. dollar. Ron Paul believes the Fed should be [[End the Fed|abolished]] and replaced with a return to the [[gold standard]].<ref name=":1">{{Cite web |last=Weissert |first=Will |date=2012-01-18 |title=The Gold Standard: Ron Paul Gives New Life to an Old Issue |url=https://www.nbcdfw.com/news/local/the-gold-standard-ron-paul-gives-new-life-to-an-old-issue/1920625/ |access-date=2025-03-09 |website=NBC 5 Dallas-Fort Worth |language=}}</ref> Advocates of [[Austrian school of economics|Austrian economics]], such as [[Ludwig von Mises]] and [[Murray Rothbard]], believe that the move to fiat currency destabilized the monetary system and undermined financial stability.<ref>{{Cite book |last=Rothbard |first=Murray Newton |url=https://books.google.com/books?id=5rgJI0ya0JcC&q=%22Legalized%20Counterfeiting%22 |title=Case Against the Fed, The |date=1994 |publisher=Ludwig von Mises Institute |isbn=978-1-61016-479-5 |language=en}}</ref> The Federal Reserve’s handling of the [[2008 financial crisis]] has also been a focal point of criticism, with some arguing that the Fed’s response—[[Emergency Economic Stabilization Act of 2008|bailing out large banks]] and financial institutions—created [[moral hazard]] and worsened the economic collapse.<ref>{{Cite book |last=Woods |first=Thomas E. |url=https://books.google.com/books?id=iKxQqw-et-QC&q=Meltdown:+A+Free-Market+Look+at+Why+the+Stock+Market+Collapsed,+the+Economy+Tanked,+and+Government+Bailouts+Will+Make+Things+Worse |title=Meltdown: The Classic Free-Market Analysis of the 2008 Financial Crisis |date=2009-02-09 |publisher=Simon and Schuster |isbn=978-1-59698-106-5 |language=en}}</ref>
[[File:Ron Paul, official Congressional photo portrait, 2007.jpg|thumb|upright=0.7|[[Ron Paul]], a longtime critic of the Federal Reserve, argues in ''[[End the Fed]]'' that the central bank undermines economic stability, enables inflation, and should be abolished in favor of a [[Hard currency|free-market monetary system]].]]
[[File:Money_supply_during_the_great_depression_era.png|upright=2.4|thumb|center| Money supply decreased significantly between [[Black Tuesday]] and the [[Emergency Banking Act|Bank Holiday in March 1933]] when there were massive [[bank runs]] across the United States]]

== See also ==
{{Portal|Banks|Business and economics|Numismatics|United States}}
{{Div col|colwidth=22em}}
* [[Farm Credit System]]
* [[Fed model]]
* [[Federal Reserve Police]]
* [[Federal Reserve Statistical Release]]
* [[Free banking]]
* [[Greenspan put]]
* [[History of Federal Open Market Committee actions]]
* [[History of central banking in the United States]]
* [[Independent Treasury]]
* [[Legal Tender Cases]]
* [[List of economic reports by U.S. government agencies]]
* [[Title 12 of the Code of Federal Regulations]]
* [[United States Consumer Price Index]] 
* [[United States Bullion Depository]]{{Nsmdns}}known as Fort Knox
* [[List of central banks]]
* [[List of financial supervisory authorities by country]]
{{Div col end}}
{{Clear}}

== References ==
{{Reflist}}

=== Bundled references ===
{{Reflist|group=list}}

== Bibliography ==

=== Recent ===
* Sarah Binder & Mark Spindel. 2017. ''The Myth of Independence: How Congress Governs the Federal Reserve''. [[Princeton University Press]].
* {{Cite book |last=Board of Governors of the Federal Reserve System |url=http://www.federalreserve.gov/pf/pdf/pf_complete.pdf |title=The Federal Reserve System: Purposes and Functions |year=2005 |ref={{Harvid|BoG|2005}} |archive-url=https://web.archive.org/web/20140111193753/http://www.federalreserve.gov/pf/pdf/pf_complete.pdf |archive-date=January 11, 2014}}
* {{Cite book |last=Board of Governors of the Federal Reserve System |url=https://www.stlouisfed.org/in-plain-english |title=The Federal Reserve in Plain English |year=2006 |ref={{Harvid|BoG|2006}}}} from the St. Louis Fed
* [[Congressional Research Service]] [https://fas.org/sgp/crs/misc/R41656.pdf Changing the Federal Reserve's Mandate: An Economic Analysis]
* [[Congressional Research Service]] [https://fas.org/sgp/crs/misc/R42962.pdf Federal Reserve: Unconventional Monetary Policy Options]
* Conti-Brown, Peter. ''The Power and Independence of the Federal Reserve'' ([[Princeton University Press]], 2016).
* Epstein, Lita & Martin, Preston (2003). ''The Complete Idiot's Guide to the Federal Reserve''. Alpha Books. {{ISBN|0-02-864323-2}}.
* [[Greider, William]] (1987). ''Secrets of the Temple''. Simon & Schuster. {{ISBN|0-671-67556-7}}; nontechnical book explaining the structures, functions, and history of the Federal Reserve, focusing specifically on the tenure of [[Paul Volcker]].
* Hafer, R. W. ''The Federal Reserve System: An Encyclopedia''. Greenwood Press, 2005. 451 pp, 280 entries; {{ISBN|0-313-32839-0}}.
* Lavelle, Kathryn C. (2013) Money and Banks in the American Political System. New York: Cambridge University Press. 978-1-107-60916-7 Explains basic political processes surrounding the Federal Reserve in the broader system of Congress and the Executive Branch.
* [[Laurence Meyer|Meyer, Laurence H.]] (2004). ''A Term at the Fed: An Insider's View''. [[HarperBusiness]]. {{ISBN|0-06-054270-5}}; focuses on the period from 1996 to 2002, emphasizing [[Alan Greenspan]]'s chairmanship during the [[1997 Asian financial crisis]], the [[Dot-com bubble|stock market boom]] and the [[September 11, 2001 attacks#Economic aftermath|financial aftermath]] of the September 11, 2001, attacks.
* Woodward, Bob. ''Maestro: Greenspan's Fed and the American Boom'' (2000) study of Greenspan in the 1990s.

=== Historical ===
* {{Cite book |last=Broz |first=J. Lawrence |title=The International Origins of the Federal Reserve System |isbn= 9780801433320 |publisher=Cornell University Press |date=1997}}
* {{Cite journal |last=Carosso |first=Vincent P. |title=The Wall Street Trust from Pujo through Medina |journal=Business History Review |date=1973 |volume=47 |pages=421–437|doi=10.2307/3113365 |jstor=3113365 |s2cid=154895813 }}
* {{Cite book |last=Chandler |first=Lester V. |title=American Monetary Policy, 1928–1941 |isbn= 9780060412272 |date=1971|publisher=Harper & Row }}
* {{Cite journal |last1=Epstein |first1=Gerald |first2=Thomas |last2=Ferguson |title=Monetary Policy, Loan Liquidation and Industrial Conflict: Federal Reserve System Open Market Operations in 1932 |journal=Journal of Economic History |volume=44 |date=December 1984 |pages=957–984 |doi=10.1017/S0022050700033040|s2cid=154187176 }}
* {{Cite book |last1=Friedman |first1=Milton |title=A Monetary History of the United States, 1867–1960 |title-link=A Monetary History of the United States |last2=Schwartz |first2=Anna Jacobson |publisher=[[Princeton University Press]] |year=1963 |isbn=978-0691003542 |author-link=Milton Friedman |author-link2=Anna Schwartz}}
* {{Cite journal |last=Kubik |first=Paul J. |title=Federal Reserve Policy during the Great Depression: The Impact of Interwar Attitudes regarding Consumption and Consumer Credit |journal=Journal of Economic Issues |volume=30 |issue=3 |date=1996 |pages=829–842 |doi=10.1080/00213624.1996.11505838}}
* {{Cite book |last=Link |first=Arthur |title=Wilson: The New Freedom |publisher=[[Princeton University Press]] |year=1956 |pages=199–240 |author-link=Arthur S. Link}}
* Livingston, James. ''Origins of the Federal Reserve System: Money, Class, and Corporate Capitalism, 1890–1913'' (1986).
* {{Cite book |last=Lowenstein |first=Roger |title=America's Bank: The Epic Struggle to Create the Federal Reserve |publisher=[[Penguin Press]] |year=2015 |isbn=978-0143109846 |author-link=Roger Lowenstein}}
* {{Cite journal |last=Marrs |first=Jim |year=2000 |title=Secrets of Money and the Federal Reserve System |journal=Rule by Secrecy |pages=64–78}}
* Mayhew, Anne. "Ideology and the Great Depression: Monetary History Rewritten". ''Journal of Economic Issues'' '''17''' (June 1983): 353–360.
* {{Cite book |last=Meltzer |first=Allan H. |url=https://archive.org/details/historyoffederal0001melt |title=A History of the Federal Reserve, Volume 1: 1913–1951 |year=2004 |publisher=University of Chicago Press |isbn=978-0-226-51999-9 |author-link=Allan H. Meltzer}} (cloth) and {{ISBN|978-0-226-52000-1}} (paper).
** {{Cite book |last=Meltzer |first=Allan H. |title=A History of the Federal Reserve, Volume 2: Book 1, 1951–1969 |year=2009 |publisher=University of Chicago Press |isbn=978-0-226-52001-8 |author-link=Allan H. Meltzer}}
** {{Cite book |last=Meltzer |first=Allan H. |title=A History of the Federal Reserve, Volume 2: Book 2, 1969–1985 |year=2009 |publisher=University of Chicago Press |isbn=978-0-226-51994-4 |author-link=Allan H. Meltzer}}
* Mullins, Eustace C. ''[[The Secrets of the Federal Reserve]]'', 1952. John McLaughlin. {{ISBN|0-9656492-1-0}}.
* Roberts, Priscilla. 'Quis Custodiet Ipsos Custodes?' The Federal Reserve System's Founding Fathers and Allied Finances in the First World War", ''Business History Review'' (1998) 72: 585–603.
* {{Cite book |last=Rothbard |first=Murray |url=https://mises.org/library/case-against-fed |title=The Case Against the Fed |date=2007 |publisher=[[Ludwig von Mises Institute]] |isbn=978-1467934893 |author-link=Murray Rothbard}}
* Shull, Bernard. "The Fourth Branch: The Federal Reserve's Unlikely Rise to Power and Influence" (2005) {{ISBN|1-56720-624-7}}.
* Steindl, Frank G. ''Monetary Interpretations of the Great Depression.'' (1995).
* {{Cite book |last=Temin |first=Peter |title=Did Monetary Forces Cause the Great Depression? |publisher=[[W. W. Norton & Company]] |year=1976 |isbn=978-0393092097 |author-link=Peter Temin}}
* Wells, Donald R. ''The Federal Reserve System: A History'' (2004)
* West, Robert Craig. ''Banking Reform and the Federal Reserve, 1863–1923'' (1977).
* Wicker, Elmus. "A Reconsideration of Federal Reserve Policy during the 1920–1921 Depression", ''Journal of Economic History'' (1966) 26: 223–238.
** Wicker, Elmus. ''Federal Reserve Monetary Policy, 1917–33.'' (1966).
** Wicker, Elmus. ''The Great Debate on Banking Reform: Nelson Aldrich and the Origins of the Fed'' [[Ohio State University Press]], 2005.
* Wood, John H. ''A History of Central Banking in Great Britain and the United States'' (2005)
* Wueschner, Silvano A. ''Charting Twentieth-Century Monetary Policy: Herbert Hoover and Benjamin Strong, 1917–1927''. Greenwood Press (1999).

== Further reading ==
* {{Cite book |last=Smialek |first=Jeanna |year=2023 |title=Limitless: The Federal Reserve Takes on a New Age of Crisis |location=New York |publisher=Alfred A. Knopf |isbn=9780593320235 |oclc=1322058230}}

== External links ==
{{Sister project links|collapsible=true|c=Category:Federal Reserve|q=Federal Reserve System|voy=no|species=no}}
{{EB1922 Poster|Federal Reserve Banking System}}
* {{Official website}}
* [https://www.federalregister.gov/agencies/federal-reserve-system Federal Reserve System] in the [[Federal Register]]
* [https://catalog.archives.gov/id/411 Records of the Federal Reserve System in the National Archives (Record Group 82)]

{{Federal Reserve System}}
{{Federal Reserve Banks}}
{{Central banks}}{{Central Banks of the World}}{{US currency and coinage}}
{{Bank regulation in the United States}}
{{Woodrow Wilson}}
{{United States topics}}
{{Authority control}}

{{DEFAULTSORT:Federal Reserve}}
[[Category:Federal Reserve System| ]]
[[Category:1913 establishments in Washington, D.C.]]
[[Category:Bank regulation in the United States]]
[[Category:Banks established in 1913]]
[[Category:Central banks|United States]]
[[Category:Government agencies established in 1913]]
[[Category:Independent agencies of the United States government]]