The nomenclature of the Federal Reserve System arose out of the Federal Reserve Act of 1913. The Federal Reserve is at times referred to as the “Fed” or the Federal Reserve. It is a government entity with private components that is in effect the central banking system of the United States. The Federal Reserve System is organized into five components. The first component of the Federal Reserve System is the board of directors. These individuals are presidentially appointed and serve on the board of the Federal Reserve in Washington, D. C.
The second component of the Federal Reserve is the Federal Open Market Committee. This committee is in charge of overseeing the United State’s open market operations. Open market operations are the buying and selling of government securities. The Open Market committee specifies the short term objectives of these operations.
The Federal Open Market is also in charge of directing operations of the Federal Reserve System in foreign exchange markets. The third component of the Federal Reserve System is the twelve Federal Reserve Banks that are located in major cities across the United States.
These banks act as fiscal authorities and agents of the United States Treasury Department and each bank has its own board of nine members. The fourth component of the Federal Reserve System is the many private U. S. member banks. These banks subscribe to a set amount of non-transferable stock in their regional Federal Reserve Bank. The fifth component of the Federal Reserve System is the various advisory councils that oversee the different areas of the Federal Reserve System (Miller, 1997).