What is the Fed?

The Fed is a system made to stabilize the economy. There are two parts of the Fed, the Board of Governors, and the District Banks. There are 7 people on the Board of Governors, which were appointed be the president. There are 12 District Banks in the U.S., most of which cover more than one state.

The Fed's Goals and Responsibilities

The Federal Reserve System has 3 main responsibilities; clear checks, supervise banks, and supply money.

Clear Checks- What this means is that if a check is brought in they make sure that the bank has enough money to go through with the check.

Supervise Banks- The Fed watches over the banks too make sure they always have enough money, or can get enough money if by chance someone withdrew all their money.

Supply Money- If a bank needed more money the Fed gives money to the closes District Bank which then gives money to the commercial bank.

History of the Fed

The Federal Reserve Act was signed by President Wilson in 1913, which established the Fed. This act was made because in the late 1700's and in the early 1800's the first money was printed and the first bank was made. This became important to help control all the money .

Fed Timeline

  • Late 1700- First money printed to help finance the war
  • Early 1800- Congress established the first bank
  • Mid 1800- Second bank was established
  • Late 1800- National Banking Act passed
  • Early 1900- President Wilson signed the Federal Reserve Act of 1913, which established the Fed
  • Mid 1900- Stock market crash, 10,000 banks failed in depression

Board of Governors

The Board of Governors is one of the two parts of the Fed. There are a total of 7 people on the Board of Governors who were all appointed by the President. One of the 7 people on the board is the Chair Person and the current Chair Person is Janet Yellen.

FOMC and Monetary Policy Tools

The FOMC stands for Federal Open Market Committee. All 7 board of Governors, the District Bank President in New York, and 4 other District Bank Presidents rotate to equal 12 people meeting. They meet 6-8 times a year to discus the Monetary Policy. The Monetary Policy includes Open Market Operations, Discount rates, and Reserve Requirements.

Open Market Operations- Government buying and selling bonds

Discount rates- Bank interest rates

Reserve Requirements- cash on hand at each bank


  • Inflation- Normal unless "severe", prices rise quickly and people spend a lot
  • Recession- bad, sluggish economy, high unemployment
  • Depression- Really bad, a severe loss in jobs

Reserve Banks

There are 12 reserve banks in the U.S. there job is to provide money to the commercial banks in it area. If a commercial bank needs money it asks the District Bank in it area an if the District Bank does not have it they ask the Fed. The banks are spread out based of the population that is why they are mostly in the east.

BEP and US mint

The BEP stands for the Bureau of Engraving and Printing. This is where the paper bills are made or in other words the cash. This is where the Fed gets their money.

The US mint is where all of the coins are made. This includes coins we buy stuff with and collectible coins.

Money and Currency

Overall the Fed is mostly in control of what happens with the money, like how much is made, where it goes, and who gets it. They give the money to the banks and control what they do with it.