Federal Reserve – Its Creation, Major Roles, Powers And Responsibilities
The Federal Reserve System among other government systems in the US stands out to play certain unique roles and responsibilities. It acts as the central bank of the United States. Since it was first created in 1913, its roles, responsibilities and goals have evolved through time to the current obligations it has(Lawrence, 1997).
To begin with, the Federal Reserve System’s main aim objective is to control the economy. It stands as a separate business entity from the government and therefore has no regulation under the government. It possesses the power to print currency and consequently, that of causing inflation. It can also lower or raise interest rates and to generally stabilize the country’s financial system(Wicker, 1966).
Apart from the powers, the Federal Reserve has a dual mandate of prize stabilization and employment, both of which are independent of each other. As such, the system conducts the nation’s monetary policy by manipulating credit and monetary conditions with an aspiration of getting maximum employment, moderate long-term interest rates and stable prices.Besides these responsibilities, the Federal Reserve regulates and supervises banking intuitions so there can be soundness and safety of the financial and banking system of the nation(Wicker, 1966). In this way, it also protects the credit rights of citizens who are consumers in the banking system.
The major roles of the Federal Reserve are essential because the organization is the gatekeeper of the U.S. economy and as the government’s bank, the organization is charged with the mandate to regulate the financial institutions of the nation. Overall, the promotion of sustainable growth, the promotion of high levels of employment, the moderation of long-term rates of interest and ensuring the stability of prices to help in the preservation of the dollar’s purchasing power all fall under the mandate of the Federal Reserve. This makes Federal Reserve the country’s money manager, the government’s bank, the banker’s bank, and the ultimate regulator of all the financial institution in the United States.
In summary, the Federal Reserve System maintains the stability of the nation’s financial system and taking up the systemic risk that is often a consequence and possibility in financial markets. It therefore ends up providing other auxiliary and relate services such as providing financial services to the US government, depository institutions, foreign institutions and others operating the nation’s payments system.