After a series of banking crises, Congress passed the Federal Reserve Act in 1913. The Federal Reserve System, often referred to as “the Fed,” is a group of twelve regional independent banks. During the Great Depression, the regional banks did not always agree on what kind of action to take. In response, Congress reformed the Fed in 1935, giving it more centralized power to deal with crises such as the Great Depression.

     Member banks own the Federal Reserve System. Members include all nationallychartered banks, which are required to join, and some state-chartered banks, which may join if they wish. A Board of Governors, appointed by the President, oversees the Fed. To prevent the board from being influenced by politics, no one President may appoint all the governors. The President also appoints the Board’s chair. The chair is the main spokesperson for the nation’s monetary policy, the actions the Fed takes to influence the level of real GDP and the rate of inflation.

   The Federal Reserve System is divided into twelve regional Federal Reserve Districts, with one regional Federal Reserve Bank in each. They monitor and report on district economic and banking conditions. The Federal Open Market Committee (FOMC) makes key decisions about interest rates and the growth of the U.S. money supply. Its members are drawn from the Board of Governors and the twelve district banks.