THE ECONOMICS OF MONEY,BANKING, AND FINANCIAL MARKETS 424

392 PA R T V Central Banking and the Conduct of Monetary Policy Appoints three directors to each FRB Federal Reserve System Board of Governors Seven members, including the chairman, appointed by the president of the United States and confirmed by the Senate Twelve Federal Reserve Banks (FRBs) Elect six directors to each FRB Member Banks Around 2900 member commercial banks Each with nine directors who appoint president and other officers of the FRB Select Federal Open Market Committee (FOMC) Federal Advisory Council Twelve members (bankers), one from each district Seven members of Board of Governors plus presidents of FRB of New York and four other FRBs Establish Reviews and determines Directs Sets (within limits) Policy Tools Advises Reserve requirements FIGURE 15-1 Advises Open market operations Discount rate Structure and Responsibility for Policy Tools in the Federal Reserve System Dashed lines indicate that the FOMC advises on the setting of reserve requirements and the discount rate The twelve Federal Reserve banks and the Board of Governors are actively involved in decisions concerning the conduct of monetary policy In particular, all seven governors are voting members of the FOMC together with the president of the Federal Reserve Bank of New York and presidents of four other Federal Reserve banks The FOMC usually meets eight times a year (about every six weeks) and makes decisions regarding the conduct of monetary policy in the United States Indeed, the FOMC is often referred to as the Fed in the press: for example, when the media say that the Fed is meeting, they actually mean that the FOMC is meeting FEDERAL OPEN MARKET COMMITTEE (FOMC) The Federal Reserve appears to be remarkably free of the political pressures that influence other government agencies in the United States Yet it is still subject to the influence of the president of the United States, since the president appoints members to the Board of Governors The power of the HOW INDEPENDENT ISTHE FED?