Structure and Functions logo

In a Nutshell

Like the federal government, the Federal Reserve System was designed to be a compromise between national and regional powers. Its regional base—the 12 Reserve Banks—makes the Fed more flexible and innovative and ensures that its decisions and actions are broadly based. The Board of Governors, acting as general overseer of the Reserve Banks, helps coordinate the Fed's operations. And the Federal Reserve's most important function—formulating and implementing monetary policy—is carried out in light of both regional and national concerns by the Board of Governors, the Reserve Banks, and the FOMC.

The Federal Reserve's major functions account for its structure and for its unique position in the public policy arena. Accountable to the government but working independently within it, the Fed is able to pursue its monetary policy goals without undue pressures from short-term political considerations.

Since its founding in 1913, the Federal Reserve System has evolved to meet the needs of a changing financial system and a growing economy. Its unique structure, however, remains its most outstanding feature and its greatest strength.