Federal Reserve

The Federal Reserve System (founded on December 23, 1913) is the central banking authority of the United States and probably the most important influence on the nation's financial markets and on the money supply. This independent government agency has the responsibility of managing the nation's monetary system. The system consists of a board of governors, 12 regional Federal Reserve banks (each a privately owned corporation), and several thousand member commercial banks. Banks belonging to the FRS (Federal Reserve System) hold about 80 percent of the deposits in all U.S. banks. Member banks are required to keep a designated percentage of their savings and checking deposits on reserve in Federal Reserve district banks. The amount that member banks are required to keep on deposit is called the reserve requirement. Raising or lowering this reserve requirement is one of three primary methods used by the FED to control the supply of money in circulation and thereby balance the economy. The three methods are listed below in the order most often used. 

I. Discount rate
II. Open-market operations
III. reserve requirements