Is the Federal Reserve accountable to anyone? (2024)

FAQs

Is the Federal Reserve accountable to anyone? ›

The Fed

Under the law, the Federal Reserve was made accountable to Congress but also was specifically designed to carry out its responsibilities without interference or control from the vested interests inherent in electoral politics, fiscal policymaking, and private banking.

The Board of Governors, the Federal Reserve Banks, and the limited liability companies (LLCs) are all subject to several levels of audit and review. The Reserve Banks' and LLCs' financial statements are audited annually by an independent public accounting firm retained by the Board of Governors.

Presidents have the ability to influence the Fed through their appointments, but that authority can be limited because of the checks and balances built into the central-bank system.

The Board of Governors--located in Washington, D.C.--is the governing body of the Federal Reserve System. It is run by seven members, or "governors," who are nominated by the President of the United States and confirmed in their positions by the U.S. Senate.

The Federal Reserve System is not "owned" by anyone. The Federal Reserve was created in 1913 by the Federal Reserve Act to serve as the nation's central bank. The Board of Governors in Washington, D.C., is an agency of the federal government and reports to and is directly accountable to the Congress.

The Bottom Line. The Federal Reserve occupies a unique role, operating both independently of the federal government while still being subject to some oversight. The agency is governed by a board whose members are selected by the President and approved by Congress.

Federal Reserve Board - Jerome H. Powell, Chair.

The president may not have the legal authority to dismiss a chairman before the end of a term, although this assumption has never been tested in court. The current chairman is Jerome Powell, who was sworn in on February 5, 2018.

The Board of Governors, an agency of the federal government that reports to and is directly accountable to Congress (figure 1.2), provides general guidance for the System and oversees the 12 Reserve Banks.

Why is the Fed not audited? ›

The Fed is extensively audited, as required by federal law.

Each Reserve bank has internal auditors who report to the bank's board of directors. This is similar to the auditing structure used by large corporations in the United States. Board of Governors staff examines activities of the Reserve banks.

There is a common misconception that the Federal Reserve System is privately owned. In fact, it combines public and private characteristics: The central governing board of the FRS is an agency of the federal government and reports to Congress.

Critics have questioned its effectiveness in managing inflation, regulating the banking system, and stabilizing the economy. Notable critics include Nobel laureate economist Milton Friedman and his fellow monetarist Anna Schwartz, who argued that the Fed's policies exacerbated the Great Depression.

It took many months and nearly straight party-line voting, but on December 23, 1913, the Senate passed and President Woodrow Wilson signed the Federal Reserve Act.

Today, the Fed is tasked with managing U.S. monetary policy, regulating bank holding companies and other member banks, and monitoring systemic risk in the financial system. The seven-member Board of Governors, the system's seat of power, is based in Washington, DC, and currently led by Fed Chair Jerome Powell.

Today, the Fed is tasked with managing U.S. monetary policy, regulating bank holding companies and other member banks, and monitoring systemic risk in the financial system. The seven-member Board of Governors, the system's seat of power, is based in Washington, DC, and currently led by Fed Chair Jerome Powell.

The Government Accountability Office can audit the Fed's activities., Appointees of the Fed can appear before congressional committees to provide testimony. The Federal Reserve is answerable to Congress, but also conducts its own internal reviews.