Federal Reserve

The Federal Reserve System (also the Federal Reserve; informally The Fed) is the central banking system of the United States.

Legal Status and Position in Government

The Federal Reserve System is an "independent entity within the government". It subjects itself to laws such as the Freedom of Information Act and the Privacy Act which cover Federal agencies, not private entities. However, its decisions do not have to be ratified by the President or anyone else in the executive or legislative branches of government, it does not receive funding appropriated by the Congress, and the terms of the members of the Board of Governors span multiple presidential and congressional terms. Once a member of the Board of Governors is appointed by the president, he or she can be as independent as a U.S. Supreme Court judge, though the term is shorter.

Related Topics:
Freedom of Information Act - Privacy Act - President - Executive - Legislative - U.S. Supreme Court

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In the 1982 case Lewis v. United States, the Ninth Circuit Federal Court of Appeals stated that the "Federal reserve banks are not federal instrumentalities for purposes of a Federal Torts Claims Act, but are independent, privately owned and locally controlled corporations." The opinion also stated that "the Reserve Banks have properly been held to be federal instrumentalities for some purposes."

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Influence of Government

The Federal Reserve is financially independent because it runs a surplus, due in part to its ownership of government bonds. In fact, it returns billions of dollars to the government each year. However, the Fed is still subject to oversight by the Congress, which periodically reviews its activities and can alter its responsibilities by statute. To further communication with Congress, the Fed delivers a report to both houses semiannually. Its independence from the executive branch was confirmed by the 1951 Accord. In general, the Federal Reserve must work within the framework of the overall objectives of economic and financial policy established by the government.

Related Topics:
Government bond - Statute - Report - Executive branch - 1951 Accord

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