(Federal Reserve) The central bank for the United States banking system and the institution that holds the primary responsibility for the making and execution of American monetary policies. Its bank notes circulate today as the United States' everyday paper currency. (Metal coins, however, are issued by the United States Treasury Department, not by the Federal Reserve.)

The Federal Reserve System represents an almost unique hybrid or blending of elements of governmental power with elements of private ownership and control. Because the authors of the 1913 legislation that set up the Federal Reserve System felt that it was vital to insulate monetary policy from "undue" pressure and influence by partisan politicians obsessed with their own short-range re-election prospects, the Federal Reserve was set up along the lines of an independent regulatory commission -- not as just one more agency of the Executive Branch that would be under the direction of the President and supervised closely by Congress. The private banking community was also given a major role in the running of the Federal Reserve System that continues to give banking interests privileged access to the process by which the US government's monetary policy is made.

The Federal Reserve System's highest decision-making body is its Board of Governors, which consists of seven members. Members of the Fed's Board of Governors are nominated for their positions by the President of the United States and then must be confirmed by a majority vote of the Senate before taking office. The members of the Federal Reserve's Board of Governors serve very long terms (fourteen years), and, once appointed and confirmed, they may not be removed from office by either President or Congress (except through a cumbersome process of impeachment for serious personal violations of the criminal law). People selected for appointment to the Board of Governors have nearly always been professional bankers, executives of Wall Street brokerage houses, or, occasionally, professional economists. They tend to share many of the relatively conservative political and economic views of the business and professional groups from which they are drawn. Because the President can not fire them from their positions before their fourteen-year terms expire, members of the Board of Governors normally feel relatively free to ignore or oppose the President's opinions when they make U.S. monetary policies. Moreover, even though some members of the Board of Governors perhaps feel an ideological kinship or sense of political gratitude that might predispose them to support the policy views of the President who appointed them, the terms of the Governors are staggered, so that only one Governor's term expires every two years, making it unlikely that any President would be able to dominate the Board with a majority of his own appointees until near the end of his own second four- year term in office. (However, every four years, the President does at least get the opportunity to designate which one of the seven Governors will serve for the next four years as Chairman of the Board of Governors and exercize "moral leadership" as first among equals in the Governors' collective deliberations on monetary policy.)

Congressional influence on the Federal Reserves System's monetary policy decisions is also in practice rather limited. The Federal Reserve system generates its own revenues to pay its expenses from fees and interest payments paid to it by the commercial banks it regulates, so Congress lacks the normal leverage it has over other agencies through carrots and sticks brandished during the annual appropriations process.