The full name of the Federal Reserve is the Federal Reserve System of the United States, which is responsible for fulfilling the duties of the first bank in the United States. Because of the fear that the central bank will have too much power, or that the central bank will be hijacked by a few interest groups, the Fed will be established later than other countries. This concern is mainly determined by the state form of the United States, and the states and the common people do not believe in the centralized system. Moreover, the United States began as a loose organization of independent states in the form of a federation, and most of the executive power was concentrated in the states**, not the federal**. Therefore, the idea of such a federal institution as a bank would alarm the states, who feared that the federal government wanted to use it as a name to expand the scope of their powers, leading to a reduction in their autonomy.
The first attempt to establish a ** bank in the United States was proposed to Congress by the first Secretary of the Treasury Alexander Hamilton after the end of the Revolutionary War - the First Bank of the United States, which was mainly responsible for helping the states of the United States to issue bonds to gradually repay the debts accumulated during the Revolutionary War, in addition, the bank could also help keep the Treasury Department's deposits and handle other federal ** financial receipts and expenditures, and Congress only approved the bank to operate for 20 years. It is not a regulator in the modern sense, but in fact a private commercial bank, which, like other commercial banks, has to absorb depositors' deposits and issue loans, and can circulate in the secondary market, and shareholders can also decide how First Bank operates, and 70% of the shares of First Bank belong to Europeans. So many Americans at that time were worried that the bank was a tool for European financial families to control the United States, so in 1811, after the expiration of the 20-year operating period, the bank was closed down without Congress renewing it.
But five years later, because of the renewed war conflict between Britain and the United States, the state banks in the United States fell into chaos, in order to restore banking order and deal with war debts, the United States once again considered the establishment of a ** bank similar to the First Bank. In 1816, the U.S. Congress voted and Madison** signed a bill establishing the Second Bank of the United States. The second bank is similar to the first bank, it is still a commercial bank, and it still has only 20 years of operation. However, because the Second Bank only helped merchants and wealthy people in the economically developed areas of the eastern United States, and did not serve the farmers who made up the majority of the American population at the time, the Second Bank was forced to close in 1836 after the expiration of its license for 20 years without the approval of Congress.
For the next 70 years, no further attempt was made to establish a bank-like institution. However, with the continuous expansion of the financial market, the shortcomings of the laissez-faire banking system have gradually been exposed, and market collapses caused by bank runs often occur, and financial crises caused by large-scale bank failures due to runs occur every few years, especially in the crisis of 1893, more than 500 banks in the United States have collapsed one after another, and many people's life savings have disappeared overnight. In 1907 the crisis broke out again, and some speculators in the market tried to short, but without success. Loans to the banks and trust investment companies of these speculators caused heavy losses. In October 1907, New York's third-largest trust and investment firm, Knick Bock, was forced to declare bankruptcy, triggering a financial tsunami that swept through the United States. Deposits have been withdrawn from banks and other financial institutions to avoid losses. This bank run soon spread from New York to all parts of the country, and a market crash similar to the 1893 financial crisis was imminent. At the time, JPMorgan Chase (J. Morganp.Morgan, the founder of Morgan, immediately called a meeting of the presidents of the most important financial companies and asked them to come together to provide funds to help the banks facing runs, and he himself contributed funds to help the financial markets through the crisis. In a way, Morgan's role was similar to that of the Federal Reserve that bailed out financial markets in 2008.
The frequent financial crises have made the public aware of the problems with free and loose financial markets, and the state urgently needs an institution to properly regulate the financial markets and at the same time play a role in stabilizing financial market confidence by providing emergency loans to banks that have been run.
The establishment of the Federal Reserve also learned from the failure of the previous ** banks, and adopted a dual organizational structure of federal ** institutions and non-profit institutions, so as to avoid the complete concentration of monetary policy in the hands of the federal**. The 12 Federal Reserve Banks under the Federal Reserve are owned by locally owned commercial banks and are private organizations, not federal institutions.
These regional banks have administrative autonomy, but it is the top decision-making level - the Federal Open Market Committee (FOMC) that decides on key monetary policies such as the final interest rate hike and cut. The FOMC is composed of 12 members, of which 7 executive members (including the chairman of the Federal Reserve) are directly appointed by **, and the remaining 5 seats are held by the chairmen of the 12 local Feds on an annual rotation. Because of the high importance of the New York Fed, it has occupied one of the seats for a long time.
The FOMC meets 8 times a year, and each meeting will discuss whether to raise interest rates or cut interest rates, and the interest rate here can be understood as the overnight lending rate between U.S. banks, which is also known as the federal ** interest rate, and the final increase or decrease in BP will be presented in the minutes of the subsequent meeting. Each of the 12 FOMC members has a different style and has different expectations for interest rates. Some people are very hawkish, and some are big, especially when the 12 regional Feds take office, if there is a big ** rotation elected, then ** will carnival in advance.
The balance between the Fed and the market is based on trust. It has full independent decision-making capabilities, does not require approval from ** or any legislative body, does not receive appropriations from the U.S. Congress, and most members serve 14-year terms, spanning multiple terms of ** and congressional terms. However, it needs to be subject to the supervision of Congress and work within the overall framework of the economic and financial policies that have been established.