Page 318 - Encyclopedia of Business and Finance

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Federal Reserve System

Education Act, people are better satisfied with the infor- December 23, 1913. The act was a response to the recur-
mation printed on food and drug labels (Kristal, Levy, ring bank failures and financial panics that had plagued
Patterson, Li, & White, 1998). While manufacturers the nation.
were initially opposed to the new nutrition labeling, After much disagreement and eventual compromise,
mainly because of cost, it was predicted that consumer all parties to the discussions—the government, banks,
health benefits would exceed the cost. other financial institutions, and a few business and labor
In 1993 the Food and Drug Administration issued leaders—agreed that a central U.S. bank was essential for
additional regulations to the Nutrition Labeling and Edu- the economic health of the country. Starting with the goal
cation Act, stating that restaurant menus must comply of stabilizing the nation’s monetary and financial system,
with regulations for nutrient and health claims that the Federal Reserve System (commonly called the Fed) has
appear on signs, placecards, and menus. The rule was undertaken a number of responsibilities.
finalized in 1996, establishing criteria under which restau-
rants must provide nutrition information for menu items.
STRUCTURE OF THE SYSTEM
Thus, healthier or low-fat menu choices must be high-
lighted with claims such as no more than 5 grams of fat Designed by Congress and subject to congressional
authority, the Fed is a politically independent and finan-
per serving. Restaurants are getting excellent customer
response, better than expected, to providing healthy food cially self-sufficient federal agency. It consists of the fol-
choices. Consumers today are demanding higher quality. lowing components:
Fair labeling and packaging help assure consumers that 1. A central bank, sometimes called the government’s
they are getting the high quality they are demanding. bank, located in Washington, D.C.
SEE ALSO Packaging 2. Twelve regional Reserve Banks, located in Atlanta,
Boston, Chicago, Cleveland, Dallas, Kansas City,
BIBLIOGRAPHY Minneapolis, New York, Philadelphia, Richmond,
Baker, H. (2001). “Worth the weight.” Global Cosmetic Industry, San Francisco, and St. Louis. Each Reserve Bank relies
163(3), 18-19. on advisory groups for information and suggestions.
Federal Trade Commission. “The Fair Packaging and Labeling Some of the more important ones concern operations,
Act, 15 U.S.C.§§1451-1461.” Retrieved from small business and agriculture, and thrift institutions
www.ftc.gov/os/statutes/fplajump.html.
(savings banks, savings and loan associations, and
Kristal, A. R., Levy, L., Patterson, R. E., Li, S. S., & White, E. credit unions). Reserve Bank officials also meet peri-
(1998). “Trends in food use associated with new labeling odically to discuss mutual problems. These groups
regulations.” American Journal of Public Health, 88(8), 1212-
1216. include the Conference of Presidents, the Conference
of First Vice Presidents, the Conference of Chairmen,
Kurtzweil, P. (1997). “Today’s special nutrition information.”
FDA Consumer, 31(4), 21-26. and the Financial Services Policy Committee.
U.S. Food and Drug Administration (FDA). “Guide to nutrition 3. Twenty-five branch banks, located within defined
labeling and education act.” Retrieved from areas of the Reserve Banks. For example, branch
www.fda.gov/ora/inspect_ref/igs/nleatxt.html. banks within the San Francisco Reserve Bank area
are located in Los Angeles, Portland (Oregon), Salt
Lake City, and Seattle.
Phyllis Bunn
Laurie Barfitt 4. Member banks, located throughout the country.
Some are national banks (all of which are commer-
cial banks) chartered by the federal government and,
by law, are members of the Fed. Others are state
FASB
commercial banks that have chosen to be members.
SEE Financial Accounting Standards Board Of the more than 9,000 commercial banks in the
country, more than 3,700 are members of the Fed.
Other depository institutions, including nonmem-
ber commercial banks and thrift institutions, are
FEDERAL RESERVE
subject to many of the Fed’s rules and regulations. A
SYSTEM member bank is required to purchase stock from its
To promote the development of a sound economy and a Reserve Bank in an amount equal to 3 percent of its
reliable banking system, Congress passed, and President combined capital and surplus. However, this invest-
Woodrow Wilson signed, the Federal Reserve Act on ment does not represent control of or a financial

ENCYCLOPEDIA OF BUSINESS AND FINANCE, SECOND EDITION 295