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Federal Reserve System

The Federal Reserve Building in Washington, D.C. © LEE SNIDER/PHOTO IMAGES/CORBIS

interest in the Reserve Bank. In return for its invest- concerns involve banking and economic
ment, however, a member bank receives a 6 percent issues.
annual dividend and the right to vote in elections of b. Consumer Advisory Council, consisting of
directors of its Reserve Bank.
thirty specialists in consumer and financial
matters.
GOVERNANCE OF THE SYSTEM
c. Thrift Institutions Advisory Council, consist-
These are three basic components in the governance struc-
ing of people representing thrift institutions.
ture of the Fed:
This Council is concerned with issues affect-
1. The Fed’s primary policy-making group is the seven- ing those institutions.
member Board of Governors. Appointed by the 3. The Federal Open Market Committee (FOMC)
president and confirmed by the Senate, members consists of the seven-member Board of Governors,
serve for one fourteen-year term only. A member the New York Federal Reserve Bank president, and
who is appointed to fill an unexpired term may be
an additional four Reserve Bank presidents who
appointed for an additional full term. From among serve on a one-year rotating basis. By tradition, the
the seven members, the Board’s chairman and vice
Committee elects the Board of Governors chairper-
chairman are also appointed and confirmed by the
son as its chairperson and the New York Reserve
president and the Senate for four-year terms.
Bank president as its vice chairperson. Although all
2. There are three advisory groups that aid the Board twelve Reserve Bank presidents attend the FOMC’s
of Governors: eight-times-a-year formal meetings, only the Board,
a. Federal Advisory Council, consisting of one the New York Reserve Bank president, and the four
member from each Reserve Bank. Its major rotating presidents are voting members.

296 ENCYCLOPEDIA OF BUSINESS AND FINANCE, SECOND EDITION