Financial Markets and Institutions (2-downloads)

banks, the Board of Governors of the Federal Reserve System, the Federal

Open Market Committee (FOMC), the Federal Advisory Council, and around

2,800 member commercial banks. Figure 9.1 outlines the relationships of these enti-

ties to one another and to the three policy tools of the Fed (open market opera-

tions, the discount rate, and reserve requirements) discussed in Chapter 10.

Twelve Federal Reserve

Banks (FRBs)

Each with nine directors 

who appoint president 

and other officers of

the FRB

Open market

operations

Board of Governors

Seven members, including 

the chairman, appointed

by the president of 

the United States and 

confirmed by the Senate

Policy Tools

Federal

Reserve System

Reviews and

determines

Appoints three

directors to 

each FRB

Elect six

directors to

each FRB

Federal Advisory Council

Twelve members (bankers),

one from each district

Discount

rate

Reserve

requirements

Select

Sets (within

limits)

Directs

Advises

Advises

Establish

Federal Open Market