nThe Federal Reserve System, which acts as this nation’s central bank, was established by Congress in 1913. The System, which is commonly known as the “Fed,” consists
of twelve Federal Reserve
Banks located in major cities throughout
nIn addition to supervising and regulating the banking industry, the Fed determines monetary policy by adjusting the interest
rates that it charges its member banks,
which in turn lend money to large commercial banks.
nBy controlling interest rates, the Fed attempts to
smooth out the business cycle,
stimulating the economy when it approaches
recession and putting on the brakes when it overheats.
nA seven-member Board of Governors oversees the Federal Reserve System.