No other federal government creation is more misunderstood than the Federal Reserve System. The Federal Reserve’s primary purpose is to act as the central banking system for the United States. Formed in 1913, the Federal Reserve was tasked by Congress with three primary functions. One – maximize employment in the United States. Two – stabilize prices (control the inflation rate) and three – influence the interest rates for long-term notes. Since 1913 the Federal Reserve has expanded its role to include setting the monetary policy and regulating the entire US banking system.
Federal Open Market Committee
The Federal Open Market Committee (FOMC) is comprised of the seven governors and five of the twelve regional bank presidents of the Federal Reserve. Four of the five regional bank seats rotate in two or three year increments with the other regional bank presidents. Only the New York Regional Bank President has a permanent seat on the FOMC, thus the rotation of only four of the five seats. This committee is tasked with setting monetary policy to maximize employment, stabilize prices and set interest rates.