Letter of Transmittal (113 KB PDF)
Board of Governors of the Federal Reserve System Washington, D.C.
June 2007
The Speaker of the House of Representatives:
Pursuant to the requirements of section 10 of the Federal Reserve Act, I am pleased to submit the ninety-third annual report of the Board of Governors of the Federal Reserve System.
This report covers operations of the Board during calendar year 2006.
Sincerely,
Ben Bernanke
Chairman
Overview of the Federal Reserve
As the nation's central bank, the Federal Reserve System has numerous, varied responsibilities:
- conducting the nation's monetary policy by influencing monetary and credit conditions in the economy
- supervising and regulating banking institutions, to ensure the safety and soundness of the nation's banking and financial system and to protect the credit rights of consumers
- maintaining the stability of the financial system and containing systemic risk that may arise in financial markets
- providing financial services to depository institutions, the U.S. government, and foreign official institutions
The Federal Reserve is a federal system composed of a central, governmental agency--the Board of Governors--and twelve regional Federal Reserve Banks. The Board of Governors, located in Washington, D.C., is made up of seven members appointed by the President of the United States and supported by a staff of about 1,850. In addition to conducting research, analysis, and policymaking related to domestic and international financial and economic matters, the Board plays a major role in the supervision and regulation of the U.S. banking system and administers most of the nation's laws regarding consumer credit protection. It also has broad oversight responsibility for the nation's payments system and the operations and activities of the Federal Reserve Banks.
The Federal Reserve Banks, which combine public and private elements, are the operating arms of the central banking system. They carry out a variety of System functions, including operating a nationwide payments system; distributing the nation's currency and coin; under authority delegated by the Board of Governors, supervising and regulating bank holding companies and state-chartered banks that are members of the System; serving as fiscal agents of the U.S. Treasury; and providing a variety of financial services for the Treasury, other government agencies, and other fiscal principals.
A major component of the Federal
Reserve System is the Federal Open
Market Committee (FOMC), which is
made up of the members of the Board of
Governors, the president of the Federal
Reserve Bank of New York, and presidents
of four other Federal Reserve
Banks, who serve on a rotating basis.
The FOMC establishes monetary policy
and oversees open market operations,
the Federal Reserve's main tool for influencing
overall monetary and credit
conditions. The FOMC sets the federal
funds rate, but the Board has sole authority
over changes in reserve requirements
and must approve any change in
the discount rate initiated by a Reserve
Bank.
Two other groups play roles in the
functioning of the Federal Reserve: depository
institutions, through which
monetary policy operates, and advisory
councils, which make recommendations
to the Board and the Reserve Banks
regarding System responsibilities.
All federally chartered banks are, by
law, members of the Federal Reserve
System. State-chartered banks may become
members if they meet Board
requirements.