The Federal Reserve System, also referred to as The Federal Reserve, or simply “the Fed”, is the central bank of the United States. It was created by Congress on December 23, 1913, when President Woodrow Wilson signed the Federal Reserve Act into law. Today, the Federal Reserve’s responsibilities fall into one of the following four general areas:

• Conducting the nation’s monetary policies by influencing money and credit conditions in the economy in pursuit of full employment and stable prices.

• Supervising and regulating banks and other important financial institutions to ensure the safety and soundness of the nation’s banking and financial system and to protect the credit rights of consumers.

• Maintaining the stability of the financial system and containing systemic risk that might arise in financial markets.

• Providing certain financial services to the U.S. government, U.S. financial institutions, and foreign official institutions and playing a major role in operating and overseeing the nation’s payment systems.

The Board of Governors, also known as the Federal Reserve Board, is located in Washington, D.C., and provides the leadership for the system. The board consists of the seven governors, appointed by the president and confirmed by the Senate. Governors serve 14-year, staggered terms to ensure stability and continuity over time.

The chairman and vice-chairman are appointed to four-year terms and may be reappointed subject to term limitations. The board’s most important responsibility is participating in the Federal Open Market Committee (FOMC), which conducts our nation’s monetary policy, the seven governors comprise the voting majority of the FOMC with the other five votes coming from reserve bank presidents.

The Fed funds its operations through assessing federal reserve banks rather than through Congressional appropriation. After its annual operation is funded, the Fed returns its profits to the U.S. Treasury. For 2014, that amounted to $77.7 billion. According to former Chairman Bernanke, the Fed has returned over $350 billion in profits since 2009. The largest annual profit to be given to the Treasury thus far was $88.4 billion for the year of 2012. The Fed’s financial accounts are audited annually by a public accounting firm, and these accounts are subject to the government’s General Accounting Office.

A network of 12 Federal Reserve Banks and 25 branches make up the Federal Reserve System under the general oversight of the Board of Governors. Reserve Banks are the operating arms of the Fed.

Each of the 12 reserve banks serves its region of the country, and all but one have branches within their districts to help provide services to depository institutions and the public. The reserve banks are named after the locations of their headquarters: Boston, New York Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas, and San Francisco. The reserve bank for our local banks is the Atlanta Bank, with its New Orleans branch.

The Fed’s payment system enables you to send a check anywhere in America for purchases, and it comes back to your bank for payment. Each bank in the country has a nine digit “routing number” on your checks, as well as, your personal checking account number to get to your checking account for clearance.

We will continue this discussion in the next column. Take heed of 2 Chronicles 7:14.

By Aaron Russel