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That determination was demonstrated in 2008, when the Fed played a leading role in responding to the financial crisis that arose.Fed Chairman Ben Bernanke led the Fed to play an aggressive role in addressing the financial crisis that occurred in 2008.

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In 1987 and the early 2000s, the Fed acted aggressively to try to reassure investors that it would support financial institutions in times of crisis.

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The Fed won, allowing it to act more independently in setting monetary policy. In 1980, a new law gave the Fed the authority to set reserve requirements for all banks, even those that are not members.

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The Fed has continued to change since the Depression. In the early 1950s, the Fed had a sharp disagreement with President Harry Truman and his Treasury Department over whether the Fed or the Treasury would control interest rates on Treasury bonds.

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In response to the ongoing depression, Congress adjusted the Federal Reserve’s structure in 1935 so that the system could respond more effectively to future crises. These reforms created the Federal Reserve System as we know it today.

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The Great Depression was exactly the situation Congress had hoped to avoid by creating the Federal Reserve System. The system did not work well in that economic crisis, however, because the regional banks each acted independently. Their separate actions often canceled one another out.

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Congress passed the Federal Reserve Act in 1913.

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The Federal Open Market Committee (FOMC) makes key monetary policy decisions about interest rates and the growth of the money supply in the United States. The committee meets about eight times a year in private to discuss the cost and availability of credit, for businesses and consumers, across the country.

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All nationally chartered banks are required to join the Federal Reserve System. The remaining members are state-chartered banks that join voluntarily.These services include reserve loans to banks in need of short-term cash.

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Board of Governors of the Federal Reserve System

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State Member Bank
Bank Merger Bank Service Company Change in Control Changes in the General Character of a State Member Bank's Business Domestic Branches Emergency Applications Membership Notice of Addition or Change in Directors or Senior Executive Officers Premises Acquisition
Sections 18(c) and 5(d)(3) of the Federal Deposit Insurance Act

Who must file?
A bank must file an application for prior Federal Reserve approval under section 18(c) or section 5(d)(3) of the Federal Deposit Insurance Act to merge with another bank or thrift institution, respectively, or to acquire the assets, or assume the liabilities, of another bank or thrift institution, if the resulting institution is to be a state member bank.

Publication requirements--newspaper/Federal Register
The applicant must publish three notices in local newspapers for a proposal processed under section 18(c). If the applicant proposes to retain any domestic branches of the target depository institution in connection with a proposal under section 18(c), then at least one of the applicant's newspaper notices must also satisfy the requirements under the Board's Regulation H (12 CFR 208.6) relating to the establishment of domestic branches by a state member bank.

Required form
The information requested in Form FR 2070 must be submitted.

Processing time frames
For merger or Oakar proposals, the Federal Reserve normally acts within 30 or 60 calendar days after receipt unless the Federal Reserve notifies the applicant that the processing period is being extended

Factors reviewed
For merger and Oakar proposals, the Federal Reserve considers the factors in section 18(c)(5) of the Federal Deposit Insurance Act. For Oakar transactions only, the Federal Reserve would consider whether the transaction complies with section 3(d) of the Bank Holding Company Act.

Consummation period
Proposals under sections 18(c) and 5(d)(3) may not be consummated for 30 calendar days after action by the Federal Reserve unless the Department of Justice authorizes a waiting period of 15 calendar days. Authority to consummate a merger or an Oakar transaction would expire three months from the earliest date on which the transaction could have been consummated unless extended by the Federal Reserve. The consummation period may not be extended beyond one calendar year from the date the application was approved by the Federal Reserve.

Section 5 of the Bank Service Company Act

Who must file?
A state member bank must file an application for prior Federal Reserve approval under section 5(a) of the Bank Service Company Act (BSC Act) to invest in or establish a bank service company if the company would engage in activities under sections 4(c), 4(d), or 4(e) of the BSC Act. A bank (regardless of its charter) must file an application for prior Federal Reserve approval under section 5(b) of the BSC Act to invest in or establish a bank service company if the company would engage in activities under sections 4(b) or 4(f) of the BSC Act.

Publication requirements--newspaper/Federal Register
No publication notice is required for applications under section 5 of the BSC Act.

Required form
The information requested in Form FR Y-4 must be submitted. The bank's filing must include the following information:

a description of each proposed activity and a discussion of how the activity is consistent with section 4(f) of the BSC Act;

the name(s) of the bank(s) proposing to invest in the bank service company;

a description of the terms and sources of funds for the transaction for each investing bank,

the effect of the proposal on competition if there are multiple investing banks that are currently engaged in any activities to be conducted by the bank service company; and

pro forma financial statements and three year projections for the proposed bank service company.

Processing time frames
The Federal Reserve normally acts on an application under section 5 within 30 or 60 calendar days after receipt unless the Federal Reserve notifies the applicant that the processing period is being extended.

Factors reviewed
For an application submitted under section 5, the Federal Reserve considers the following:

the financial and managerial resources and future prospects of the investing bank(s) and the bank service company, including the financial capability of a bank to make an investment in the bank service company;

the potential for any adverse effects, such as undue concentration of resources, unfair or decreased competition, conflicts of interest, or unsafe or unsound banking practices; and

whether the proposed activities to be conducted by the bank service company have been approved for bank holding companies by the Board through regulation or Order.

Consummation period
Proposals to invest in or establish a bank service company may be consummated immediately.

Sections 225.41, 225.42, and 225.43 of Regulation Y

Who must file?
Any person, as defined in section 225.2 of Regulation Y, proposing to acquire control of a state member bank must provide prior notice to the Federal Reserve under section 225.43 of Regulation Y.

Publication requirements--newspaper/Federal Register
For change in control proposals, a person must publish a notice in the local newspaper(s) and the Federal Reserve will publish a notice in the Federal Register.

Required forms
The information requested in Form FR 2081a and Form FR 2081c must be submitted.

Processing time frames
The notice period would expire 60 days after the notice is received by the Federal Reserve unless the Federal Reserve notifies the applicant that the period is being extended.

Factors reviewed
For change in control proposals, the Federal Reserve considers the factors in section 225.43(g) of Regulation Y.

Consummation period
Change in control proposals may be consummated immediately upon approval. Authority to consummate a change in control transaction would expire three months from the earliest date on which the transaction could have been consummated unless extended by the Federal Reserve. The consummation period may not be extended beyond one calendar year from the date the notice was acted on by the Federal Reserve.

Section 208.3(d)(1) and (2) of Regulation H

Who must file?
A state member bank must receive the prior approval of the Board before making any significant change in the general character of its business. Changes in the general character of a bank's business would include, for example, providing a significant level of credit facilities to a new customer base or in a new geographic area, or concentrating solely on subprime lending or leasing activities. These activities can present novel risks for banking organizations, depending on how they are conducted and managed, and may also present risks to the deposit insurance fund. In many cases, these activities involve aggressive growth plans and may give rise to significant financial, managerial, and other supervisory issues. A significant change in a bank's business plan without the Board's prior approval may be considered a violation of Regulation H and may be addressed through follow-up supervisory action.

Publication requirements--newspaper/Federal Register
No publication notice is required.

Required information
The application must be submitted in the form of a letter that details the proposed changes to the general character of business.

Processing time frames
The Federal Reserve normally acts within 30 or 60 calendar days after receipt unless the Federal Reserve notifies the applicant that the processing period is being extended.

Factors reviewed
Consideration is given to a bank's proposed business plan in order to ensure, at a minimum, that appropriate financial and managerial standards are met.

Consummation period
Following approval of the change in the general character of a bank's business, the new business plan may be implemented as proposed.

Section 208.6 of Regulation H

Publication requirements--newspaper/Federal Register
The applicant must publish a notice in local newspapers.

Required information
The application must be submitted in the form of a letter that includes a detailed description of the proposed branch. A copy of the affidavit of publication must also be included with the letter.

Processing time frames
For branch proposals processed on an expedited basis, the Federal Reserve would act by the fifth business day after the expiration of the public comment period.For other branch proposals, the Federal Reserve normally acts within 30 or 60 calendar days after receipt unless the Federal Reserve notifies the applicant that the processing period is being extended.

Factors reviewed
For branch proposals, the Federal Reserve considers the factors in section 208.6(b) of Regulation H.

Emergency conditions associated with a problem or failing banking organization may allow for processing of an application under the streamlined procedures of the Bank Holding Company Act, the Federal Deposit Insurance Act, the Change in Bank Control Act, or the Federal Reserve Act.The two types of emergency procedures are expeditious action and immediate action. Under the expeditious action procedures, the Federal Reserve allows the public up to 10 days to comment on a proposal. Under the immediate action procedures, the Federal Reserve would act on a proposal as soon as possible.

Potential filers are encouraged to contact the Federal Reserve as early as possible to discuss emergency procedures. While all applications or notifications involving a failing institution would be reviewed, only a filing by an organization or individual identified by the FDIC as a winner in the bidding process is ultimately approved.

Who must file?
Bank holding companies, banks, or individuals proposing to acquire a failing banking organization.

Publication requirements--newspaper/Federal Register
Under the expeditious action procedure, the applicant must publish a notice in local newspapers and the Federal Reserve will publish a notice in the Federal Register with a public comment period of 10 days. Under the immediate action procedure, no publication notice is required.

Processing time frames
Under the expeditious action procedure, the Federal Reserve would act on an application as soon as practicable, taking into account the expiration of the public comment period. Under the immediate action procedure, the Federal Reserve would act on an application on the same day that the failing institution is closed.

Consummation period
For applications approved under the expeditious action procedure, which normally involve a waiting period after approval (for example, Bank Holding Company Act and Bank Merger Act filings), the proposal may be consummated on or after the fifth calendar day following the approval date. For applications processed under the expeditious action procedures, which normally do not involve a waiting period, and for all applications processed under the immediate action procedures, the proposal may be consummated immediately.

Section 208.3 of Regulation H

Publication requirements--newspaper/Federal Register
No publication notice is required.

Required form
The information requested in Form FR 2083A/B/C must be provided.

Factors reviewed
For membership proposals, the Federal Reserve considers the factors in section 208.3(b) of Regulation H.

Consummation period
Membership proposals may be consummated immediately. However, the banking organization must first arrange the purchase of relevant Reserve Bank stock so that the stock may be issued when the bank becomes a member.

Section 225.72 of Regulation Y

Who must file?
A state member bank must provide prior notice to the Federal Reserve to add a director or a senior executive officer if the bank meets the criteria in section 225.72 of Regulation Y. An institution may request a waiver of the prior notice requirement if the individual's services are needed immediately.

Publication requirements--newspaper/Federal Register
No publication notice is required.

Required forms
The information requested in Form FR 2081b and Form FR 2081c must be submitted.

Processing time frames
The notice period expires 30 days after the notice is received by the Federal Reserve unless the Federal Reserve notifies the applicant that the processing period is being extended.

Factors reviewed
For proposals to add a director or senior officer, the Federal Reserve considers the factors in section 225.73(c) of Regulation Y.

Consummation period
These proposals may be consummated immediately.

Section 208.21 of Regulation H

Who must file?
A state member bank must provide prior notice to the Federal Reserve under section 208.21 of Regulation H to increase its investment in bank premises if the aggregate of all such investments and loans, together with the amount of any indebtedness incurred by any corporation that is an affiliate of the bank, will be more than the bank's perpetual preferred stock and related surplus plus common stock and surplus. The filing threshold is raised to 150 percent of the bank's perpetual preferred stock and related surplus plus common stock and surplus if the proposal meets the conditions in section 208.21(a)(3) of Regulation H.

Publication requirements--newspaper/Federal Register
No publication notice is required.

Required information
Applications must be submitted in the form of a letter that includes the applicant's current and pro forma financial statements, as well as the amount, general description, and purpose of the proposed investment in bank premises. The letter should also identify the seller and whether such party is related to, or is an affiliate of, the applicant or any of its directors, senior executive officers, or shareholders. If the property is being purchased from an affiliate or related party, the applicant should provide a copy of an appraisal of the property.

Processing time frames
The notice period would expire 15 days after the notice is received by the Federal Reserve unless the Federal Reserve notifies the applicant that the period is being extended.

Factors reviewed
For premises proposals, the Federal Reserve considers the impact of the transaction on the applicant's financial condition and the overall financial and managerial condition of the applicant.

Consummation period
Premises proposals may be consummated immediately.

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board of governors of the federal reserve system

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Federal Reserve Board - State Member Bank

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Bank Merger Bank Service Company Change in Control Changes in the General Character of a State Member Bank's Business Domestic Branches Emergency Applications Membership Notice of Addition or Change in Directors or Senior Executive Officers Premises Acquisition Sections 18(c) and 5(d)(3) of the Federal Deposit Insurance Act Who must file?

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One Federal Reserve Bank is located in each district, though it may have branches in other cities in the district as well. Each of these banks monitors and reports on economic and banking conditions in its district.

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Board of Governors of the Federal Reserve System

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Pursuant to the Federal Reserve Act, each of the 12 Reserve Banks is separately incorporated and has a nine-member board of directors.

Commercial banks that are members of the Federal Reserve System hold stock in their District's Reserve Bank and elect six of the Reserve Bank's directors; three remaining directors are appointed by the Board of Governors. Most Reserve Banks have at least one Branch, and each Branch has its own board of directors. Branch directors are appointed by either the Reserve Bank or the Board of Governors.

Directors serve as a link between the Federal Reserve and the private sector. As a group, directors bring to their duties a wide variety of experiences in the private sector, which gives them invaluable insight into the economic conditions of their respective Federal Reserve Districts. Reserve Bank head-office and Branch directors contribute to the System's overall understanding of the economy.

The Federal Reserve is not funded by congressional appropriations. Its operations are financed primarily from the interest earned on the securities it owns--securities acquired in the course of the Federal Reserve's open market operations. The fees received for priced services provided to depository institutions, such as check clearing, funds transfers, and automated clearinghouse operations, are another source of income; this income is used to cover the cost of those services. After payment of expenses and transfers to surplus (limited to an aggregate of $10 billion), all the net earnings of the Federal Reserve Banks are transferred to the U.S. Treasury.

Federal Reserve net earnings are paid to the U.S. Treasury

The Federal Reserve transfers its net earnings to the U.S. Treasury.

Despite the need for coordination and consistency throughout the Federal Reserve System, geographic distinctions remain important. Effective monetary policymaking requires knowledge and input about regional differences. For example, two directors from the same industry may have different opinions regarding the strength or weakness of that sector depending on their regional perspectives. The decentralized structure of the System and its blend of private and public characteristics, envisioned by the System's creators, therefore, remain important features today.

Structure and Function

The 12 Federal Reserve Banks and their 24 Branches are the operating arms of the Federal Reserve System. Each Reserve Bank operates within its own particular geographic area, or district, of the United States.

Each Reserve Bank gathers data and other information about the businesses and the needs of local communities in its region. That information is then factored into monetary policy decisions by the FOMC and other decisions made by the Board of Governors.

Reserve Bank Leadership

As set forth in the Federal Reserve Act, each Reserve Bank is subject to "the supervision and control of a board of directors." Much like the boards of directors of private corporations, Reserve Bank boards are responsible for overseeing their Bank's administration and governance, reviewing the Bank's budget and overall performance, overseeing the Bank's audit process, and developing broad strategic goals and directions. However, unlike private corporations, Reserve Banks are not operated in the interest of shareholders, but rather in the public interest.

Each year, the Board of Governors designates one chair and one deputy chair for each Reserve Bank from among its Class C directors. The Federal Reserve Act requires that the chair of a Reserve Bank's board be a person of "tested banking experience," a term which has been interpreted as requiring familiarity with banking or financial services.

Each Reserve Bank board delegates responsibility for day-to-day operations to the president of that Reserve Bank and his or her staff. Reserve Bank presidents act as chief executive officers of their respective Banks and also serve, in rotation, as voting members of the FOMC. Presidents are nominated by a Bank's Class B and C directors and approved by the Board of Governors for five-year terms.

Reserve Bank Branches also have boards of directors. Pursuant to policy established by the Board of Governors, Branch boards must have either five or seven members. All Branch directors are appointed: the majority of directors on a Branch board are appointed by the board of directors of the Reserve Bank, and the remaining directors on the board are appointed by the Board of Governors. Each Branch board selects a chair from among those directors appointed by the Board of Governors. Unlike Reserve Bank directors, Branch directors are not divided into different classes. However, Branch directors must meet different eligibility requirements, depending on whether they are appointed by the Reserve Bank or the Board of Governors.

Reserve Bank and Branch directors are elected or appointed for staggered three-year terms. When a director does not serve a full term, his or her successor is elected or appointed to serve the unexpired portion of that term.

Reserve Bank Responsibilities

The Reserve Banks carry out Federal Reserve core functions by

1. supervising and examining state member banks (state-chartered banks that have chosen to become members of the Federal Reserve System), bank and thrift holding companies, and nonbank financial institutions that have been designated as systemically important under authority delegated to them by the Board;

2. lending to depository institutions to ensure liquidity in the financial system;

3. providing key financial services that undergird the nation's payment system, including distributing the nation's currency and coin to depository institutions, clearing checks, operating the FedWire and automated clearinghouse (ACH) systems, and serving as a bank for the U.S. Treasury; and

4. examining certain financial institutions to ensure and enforce compliance with federal consumer protection and fair lending laws, while also promoting local community development.

In its role providing key financial services, each Reserve Bank acts, essentially, as a financial institution for the banks, thrifts, and credit unions in its District--that is, each Reserve Bank acts as a "bank for banks." In that capacity, it offers (and charges for) services to these depository institutions similar to those that ordinary banks provide their individual and business customers: the equivalent of checking accounts; loans; coin and currency; safekeeping services; and payment services (such as the processing of checks and the making of recurring and nonrecurring small- and large-dollar payments) that help banks, and ultimately their customers, buy and sell goods, services, and securities.

In addition, through their leaders and their connections to, and interactions with, members of their local communities, Federal Reserve Banks provide the Federal Reserve System with a wealth of information on conditions in virtually every part of the nation--information that is vital to formulating a national monetary policy that will help to maintain the health of the economy and the stability of the nation's financial system.

Certain information gathered by the Reserve Banks from Reserve Bank directors and other sources is also shared with the public prior to each FOMC meeting in a report commonly known as the Beige Book. In addition, every two weeks, the board of each Reserve Bank recommends discount rates (interest rates to be charged for loans to depository institutions made through that Bank's discount window); these interest rate recommendations are subject to review and determination by the Board of Governors.

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board of governors of the federal reserve system

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Federal Reserve Board - Federal Reserve Banks

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Pursuant to the Federal Reserve Act, each of the 12 Reserve Banks is separately incorporated and has a nine-member board of directors. Commercial banks that are members of the Federal Reserve System hold stock in their District's Reserve Bank and elect six of the Reserve Bank's directors; three remaining directors are appointed by the Board of Governors.

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The Federal Reserve System is overseen by the Board of Governors of the Federal Reserve. The Board of Governors is headquartered in Washington, D.C. Its seven governors, or members, are appointed for staggered 14-year terms by the President with the advice and consent of the Senate.

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The Structure of the Federal Reserve System

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The Structure of the Federal Reserve System

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The structure of the Federal Reserve System represents compromises between centralized power and regional powers.