The Federal Reserve: America's One Central Bank

The United States has one central bank: the Federal Reserve System ("the Fed").

Structure: One System, 12 Banks

Created by the Federal Reserve Act of 1913 after a series of financial panics, the Fed is a unique public-private hybrid:

• Board of Governors (Washington, DC): 7 governors appointed by President, confirmed by Senate (14-year terms). Sets policy, supervises banks.
• 12 Regional Reserve Banks: Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas, San Francisco. Operate independently but under Board oversight. Implement policy, provide payment services, supervise regional banks.
• FOMC (Federal Open Market Committee): 7 Governors + 5 Reserve Bank Presidents (NY permanent, 4 rotate). Sets monetary policy (interest rates, open market operations).

Core Mandates (Dual Mandate)

1. Maximum Employment
2. Stable Prices (2% inflation target)

Plus: Moderate long-term interest rates, financial stability, consumer protection, payment system efficiency.

Independence & Accountability

The Fed is independent within government: decisions don't require presidential/executive approval; funded by its own earnings (not Congress appropriations). But it's accountable: Chair testifies to Congress semi-annually; publishes minutes, transcripts, reports; subject to GAO audit (except monetary policy deliberations).

Not "Central Banks" (Plural)

While there are 12 Reserve Banks, they are branches of a single central banking system—not separate central banks. The Eurozone has a similar structure (ECB + national central banks), but the Fed is a unified entity.