Federal reserve

Federal reserve

Federal reserve

The Federal Reserve System is the United States central banking authority. It acts as the government fiscal agent, regulates commercial banks reserve accounts, gives loans to commercial banks, and oversees currency supply ( Axilrod, 2013). The system consists of the Fed Board of Governors, the 12 Federal Reserve Banks, the CFPB and the Federal Open Market Committee. The Fed Board of Governors is responsible for determining the reserve requirements of the member banks, reviewing and setting discount rates, and regulating the budgets of the reserve banks ( Axilrod, 2013).

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When comparing the Federal Reserve System and the European Central Bank, a number of differences arise. For instance, unlike the Fed, the European Central Bank was created only for monetary policy (Ngin & Langin, 2013). The bank has no power to regulate the financial system or banks. Additionally, the Federal Reserve System has more independence, ECB independence is limited because it does not control its budget (Ngin & Langin, 2013). The above discussed facts show that the Federal Reserve System is better equipped in offering a healthy economic environment for investment.

References
Axilrod, S. H. (2013). The Federal Reserve: What Everyone Needs to Know. Oxford University Press.
Ngin, C. L., & Langin, C. (2013). The European Central Bank and the Federal Reserve System – A General Comparison. GRIN Verlag.

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