The Federal Reserve System

The Federal Reserve System was created in 1913 in order to provide elastic money supply, especially during the harvesting seasons, to meet the farmers' demands for short-term loans. The Federal Reserve System was to meet these seasonal demands for money through the reserve balances of commercial banks. To ensure efficient functioning of the Federal Reserve System, the territory of the United States was divided into twelve Federal Reserve districts, each one having a Federal Reserve Bank. Ten of the twelve Reserve Banks have branch offices.

Central coordination is provided by the Board of Governors (Совет управляющих) in Washington, D.C. Thus, the Federal Reserve System is a national system that is well adjusted to local economic conditions. Handling daily transactions with banks in its territory, each Reserve Bank maintains close contacts with the local business community.

Unlike commercial banks, Federal Reserve Banks are not operated for profit. To serve the community is their function. The shares of Federal Reserve Banks are held by member banks.

Each Federal Bank is managed by nine directors, three of which, bankers themselves, represent member banks, three are local businessmen and three, not in any way connected with the banking industry, are appointed by the Board of Governors in Washington.

The board of directors appoints the officers who are given the responsibility for the daily operations of the Reserve Banks.

Members of the Board of Governors are appointed by the US President, which is ratified by the Senate. The Board of Governors has budgetary control over the Reserve Banks, provides annual audit of all of them and their branches. It is also responsible for changes in reserve requirements.