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Special Topic
A new era begins at the Federal Reserve: Bernanke named Fed chairman
 In
February, Alan Greenspan ended his 18-year tenure as chairman
of the Federal Reserve Board as Ben S. Bernanke took the helm
of the Fed. While this transition marked the end of an era
at the nation’s central bank, the role of the Fed’s
chairman remains the same.
The Fed chairman and the Board of Governors
As the nation’s central bank, the Federal Reserve System plays
an integral role in the nation’s economic and financial system,
and the chairman of the Federal Reserve Board has many important
responsibilities within the system.
For one, the Fed chairman presides over the Federal Reserve’s
Board of Governors in Washington, D.C. The Board, a federal
agency, is composed of seven governors who are nominated by
the president and confirmed by the Senate. A full term for
a Federal Reserve governor is 14 years, but members can serve
longer if they were appointed to fill another governor’s
unexpired term. The president appoints the Fed chairman to
a four-year term, but the chairman can be reappointed multiple
times while serving on the Board.
Overseeing numerous functions
The Board of Governors oversees the operations of the 12 Reserve
Banks, exercises broad authority over the nation’s payments
system, administers most of the nation’s laws regarding
consumer credit protection, and plays a significant role in
the supervision and regulation of the nation’s banking
system. In addition, the Board has sole authority over changes
in depository institutions’ reserve requirements1
and must approve any change in the discount rate—the
rate that the Reserve Banks charge depository institutions
to borrow funds—initiated by a Federal Reserve Bank.
The Fed chairman also, by tradition, is elected by the members
of the Federal Open Market Committee (FOMC) to serve as its
chair. The FOMC is the monetary policymaking body that sets
the target for the federal funds rate,2
a key short-term interest rate that influences other longer-term
interest rates in our economic system.
The chairman also serves as the Federal Reserve System’s
primary point of contact with other governmental organizations,
such as the U.S. Department of the Treasury or the Council
of Economic Advisers, and participates in international economic
forums.
Helping ensure a strong economy
While Federal Reserve chairmen may come and go, the important
jobs they perform are constant and help to maintain the strength
and resiliency of the nation’s economy and financial system.
By Pierce Nelson, assistant vice president,
Atlanta Fed
1Reserve requirements
are set by the Board of Governors for the amounts of funds
that depository institutions must hold aside against specific
deposit liabilities.
2The federal funds rate
is the rate that banks charge each other to borrow funds on
a short-term basis—usually overnight—to meet their reserve
requirements.
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