What Is the Federal Reserve Board (FRB)?

What Is the Federal Reserve Board (FRB)?

Let me explain the Federal Reserve Board, or FRB, directly to you. It's the Board of Governors of the Federal Reserve System, serving as the main governing body of the U.S. central bank. Established by the Banking Act of 1935, the FRB's members are required by law to represent a fair mix of the country's financial, agricultural, industrial, and commercial interests, along with its geographical divisions.

Key Takeaways

You should know that the FRB governs the Federal Reserve System, which is the United States' central bank. As an independent government agency, it handles monetary policy using its developed tools. The board has seven members: a chair, vice chair, and vice chair for supervision, all nominated by the president and confirmed by the Senate. These leadership positions must be filled from the seven sitting governors. Importantly, no two governors can come from the same Federal Reserve District.

How the Federal Reserve Board (FRB) Works

Here's how the FRB operates: It's a seven-member body that governs the Federal Reserve System, the U.S. central bank tasked with maintaining a stable financial system and economy through monetary policy. The Senate-confirmed members form an independent federal agency. The Fed's mandate is to aim for maximum sustainable employment and stable prices with moderate long-term interest rates. The FRB chair and officials testify before Congress, but they set policy independently from legislative or executive branches, structured somewhat like a private corporation.

Remember, the vice chair for supervision must appear before the Senate and House, and at semiannual hearings, they discuss the board's efforts, activities, objectives, and plans.

Appointments, Terms, and Roles

The president appoints FRB members, and the Senate confirms them. Each gets a 14-year term, but they might serve shorter or longer. If replacing someone, a new member finishes the remaining term and can then be reappointed for a full one. If no replacement is confirmed at term's end, the member can keep serving, potentially longer than 14 years. The president can remove a member for sufficient cause. Terms are staggered, with a new appointment every two years. Once in, members operate independently.

From the board's members, the president appoints the chair, vice chair, and vice chair for supervision to four-year terms, and they can be reappointed within their term limits. The board has subcommittees on areas like Board Affairs, consumer and community affairs, economic and monetary affairs, financial stability, Federal Reserve Bank affairs, supervision and regulation, payments, clearing, and settlement, plus one on smaller regional and community banking.

Duties of the Federal Reserve Board

The most critical role for FRB members is participating in the Federal Open Market Committee (FOMC), which manages open market operations to control circulating money. The FRB also adjusts other tools like the discount rate, Interest on Reserve Balances, and the Overnight Reverse Repurchase facility rate as needed. Additionally, the board supervises the Fed's 12 regional branches.

Administration of the Federal Reserve Board Officers

The FRB's main offices are in the District of Columbia. At meetings, the chairman presides; if absent, the vice chairman steps in. If both are out, the board elects a temporary chair. Expenses and salaries come from assessments on Federal Reserve banks. Board members can't hold positions or stock in banks, banking institutions, or trust companies, and they must swear to this under oath.

What Does the Federal Reserve Board Do?

The FRB promotes price stability, sustainable economic growth, and maximum employment by implementing monetary policies. These are the tools it uses to influence interest rates and the money supply.

How Much Do Federal Reserve Board Members Make?

The Federal Reserve Chair holds a Level I executive schedule position, earning $250,600. Other board members are at Level II, making $225,700 in 2025.

Can the President Remove the Chair of the Federal Reserve?

Board members and the chair are appointed by the president and approved by the Senate. By statute, removal is only 'for cause,' like negligence, misconduct, corruption, or illegal conduct. So, the chair isn't likely to be removed without good reason.

The Bottom Line

In summary, the Federal Reserve Board governs the U.S. central banking system. Its main mission is controlling monetary policy for stable prices, sustainable growth, and full employment. It uses tools like interest rate adjustments and open market operations to affect the money supply and economy.