[US Institutions] Federal Reserve

I realized I forgot a key institutions from the US: the federal reserve, also known as just the Fed.

What is it ?

The Federal Reserve was created quite recently, in 1913. It is the central bank of the United States. It is governed by a seven-members Board of Governors, with a chairman (currently Ben Bernanke). The Governors are appointed by the President of the United States and confirmed by the Senate for 14 years long term.

The Fed is independent from the government but subject to oversight by the appropriate committees in the US Congress.

The Federal Reserve has twelve regional federal banks, dollars bill are marked by a letter from A to L depending of which regional bank issued them.

The Fed is self-funded, getting most of its revenues from its financial operations; in fact, the Fed transfers large amounts of money to the US treasury.

What are its missions ?

The Federal Reserve implements the US monetary policies, supervise banking institutions and provide financial services.

As such, the Fed is distributing dollar coins and bills – though those are produced by the Department of Treasury.

Its actions are guided by the objectives of preventing inflation or deflation, moderating interest rates, strengthen the US economy.

In Europe ?

The European Union as such does not have a central bank, because the 27 member states have different currency. But for the Eurozone members, there is a European Central Bank. The ECB is an official EU institution only since last year and the adoption of the treaty of Lisbon.

Unlike the Fed, the ECB has only one objective: keep the inflation a fraction below 2%.

The euro coins are produced by the member states, after authorization by the ECB, the bills are produced by the ECB.

In practice, the ECB lends money differently from the US Fed, because there is no equivalent to Treasury Bonds in the Eurozone.


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