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Federal Reserve Board of Governors

From Wikipedia, the free encyclopedia

Federal Reserve Board of Governors
Federal Reserve System headquarters
Federal Reserve System headquarters
HeadquartersEccles Building
Washington, D.C.
ChairmanJerome Powell

The Board of Governors of the Federal Reserve System, commonly known as the Federal Reserve Board, is the main governing body of the Federal Reserve System. It is charged with overseeing the Federal Reserve Banks and with helping implement the monetary policy of the United States. Governors are appointed by the President of the United States and confirmed by the Senate for staggered 14-year terms.[1][2]

YouTube Encyclopedic

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  • ✪ How The Federal Reserve Works (And Who Really Owns It)
  • ✪ The Honorable Jerome H. Powell, Chairman of the Board of Governors of the Federal Reserve System
  • ✪ Who Owns the Federal Reserve
  • ✪ Keynote Address: Lael Brainard, Governor, Federal Reserve Board
  • ✪ The Hon. Janet L. Yellen, Chair, Board of Governors of the Federal Reserve System

Transcription

The Federal Reserve: the cornerstone of the American economy. For just over a century the Fed has overseen the financial system of the US, but its track record has been far from perfect. Worse yet, it has such a unique and convoluted structure that it’s very difficult for people to really understand it, which is why unsurprisingly the Fed has been subject to various conspiracy theories, from being owned by the Rothschilds to being operated by lizard people. Today, we’re going back to the dawn of American finance to see how the Fed was created, how it works and who really owns it. This video is brought to you by Skillshare, where you can find a ton of different classes including my own series of videos on how the stock market works. You can watch them for free by registering with the link in the description. America during the late 19th century was a nation in turmoil and not just in the literal sense. The Civil War was no doubt devastating, but even during the peace that followed America was plagued by frequent and deep economic depressions. The underlying cause was simple: America just lacked a proper financial system and more importantly, it didn’t have a central bank to save the day when things turned bad. Now, keep in mind, central banking wasn’t a new concept. The Dutch were the first to come up with a central bank in 1609 and it was instrumental in transforming the Netherlands from a swampy backwater into a global economic empire. Following the example of the Dutch, the English created the Bank of England in 1694, which of course became the backbone of the British Empire. But it’s exactly this association with the British that made the Founding Fathers reluctant to use the same model in the United States. There were two attempts at establishing a central bank even despite public opposition: Alexander Hamilton himself led the first movement in 1791. But in both cases the systems lasted under 20 years and did little to stabilize the situation. And by all accounts the situation was very very bad. Back then even a single local bank failing could result in nationwide panics. People knew that no one could save their bank if it went bust, so as soon as rumors of insolvency started spreading, everyone frantically started withdrawing whatever they had, bankrupting otherwise healthy and solvent banks simply out of fear. Such bank runs happened with frightening regularity and the depressions that followed were long and painful. Of course, American bankers realized very well just how bad their industry was doing. Paul Warburg, one of the great American bankers of his day, said in 1907 that the American banking system then was at about the same point as 15th century Italy or Babylon in 2,000 BC. Just a few months after Warburg made that statement, the country suffered the Panic of 1907 and it was particularly severe. To start things off, in 1906 a devastating earthquake destroyed 80% of San Francisco. With reconstruction efforts underway, capital was very tight and because all the money back then was in paper form it was much more difficult to reallocate it across the country. One banker tried to abuse that by manipulating the stock price of the United Copper company back on Wall Street. He hoped to see his shares rise exponentially in value, but instead they crashed, dragging down the entire stock market with them. That banker was involved in 10 different banks across the East Coast and one after another these banks failed as people assumed they were insolvent and withdrew all their money. Pretty soon even banks that had nothing to do with that guy were going under, and so the fearful bankers of America turned to the only man with the power to save them: J. P. Morgan. Back then, John Morgan was the king of Wall Street, and even today the bank he created is the largest one in America. He wasn’t the wealthiest man at the time, that title belonged to John Rockefeller, but Morgan was certainly the man everyone turned to when things got bad. In October 1907 Morgan summoned the great bankers of the day to his office at 23 Wall Street. With the collective capital of America’s big banks, Morgan arranged for the rescue of the healthy banks that were nevertheless near bankruptcy due to irrational fears. Virtually the same thing would happen a century later in 2008 when the government bailed out the banks, but this time it was happening entirely thanks to private individuals like John Morgan. Once the panic was contained, it became clear to everyone that a central bank was necessary and Congress immediately passed legislation to create one. However, that was pretty much the only thing everyone agreed on: the actual details of how it would work sparked long and fierce debates that halted any progress. The agricultural South, for example, was afraid that a powerful central bank would give Washington and Wall Street too much power over them. The bankers meanwhile wanted to make sure that the central bank would not be manipulated by political interests: they wanted it to be as independent as possible from Washington. The sheer number of competing parties made creating a central bank extremely difficult and negotiations would in fact take over 5 years to finalize. What’s interesting though, is that these negotiations weren’t happening on Capitol Hill. Instead, they were held 600 miles south of Washington on Jekyll Island in Georgia. That resort was home to an exclusive club of over a hundred of the wealthiest men at the time, including John Morgan. Of course, only a select few would help draft the actual plan for the central bank and it wouldn’t be until 1913 that legislation would actually come to pass. The newly created Federal Reserve was truly a miracle of compromise. To accommodate all the various interests of the diverse United States, the Fed became a central bank unlike any other in the world. To begin with, it wasn’t even a single bank, instead it was a network of twelve regional banks each governed by local bankers and businessmen. Some of these banks were in obvious places, like New York and Chicago, but many of the other locations came down to politics. The Senator from Missouri, for example, was a key vote needed to pass legislation, which why today Missouri is the only state to have two federal reserve banks within its borders. To appease Washington, these twelve regional banks would have a single governing body, comprised of seven people appointed by the president and confirmed by the Senate. To limit the president’s power, he can only appoint one governor every two years with a 14-year term. But the really unique part of the Fed’s structure, and you can thank John Morgan for that, is the fact that each regional bank is actually structured as a private corporation that has its own stock. Here’s how it works: every nationally-chartered bank in America is required by law to keep 6% of its capital in its regional reserve bank. In exchange, that private bank receives an equivalent amount of shares in the regional reserve bank. These shares, however, are quite different from the shares of public companies. Their price is fixed at $100 per share and they cannot be sold or traded. They carry voting rights to about two-thirds of the Board of Directors for that regional reserve bank, but as we know the real power is in the Board of Governors appointed by the President. What these shares do have, however, is a fixed 6% dividend per year. It’s worth noting that this dividend doesn’t entitle the banks to any the Fed’s profits. Instead, everything the Fed earns above that 6% payout goes directly into the Treasury. And keep in mind, the Fed is very profitable: in 2017 it sent $80 billion to the Treasury, while only paying out $14 billion to the regular banks that hold its stock. So who are the shareholders of the Federal Reserve? Well, basically every big bank in America. The full list is 150 pages long, but pretty much every name you know appears on it. But here’s the beautiful thing: most of America’s big banks are public corporations. In other words, if you want to benefit and make money off of the unique structure of the Federal Reserve you can do that by purchasing stock in American banks. Since ownership in the Fed depends on capital, the bigger the bank, the bigger its ownership stake. Therefore, it would be wisest to start from the top of the list. And speaking of the stock market, in case you somehow missed it last month I released a 20-minute animated series of videos on how the stock market works on Skillshare. I cover topics like how dividends get paid out or how ETFs work and if you want to watch the full class you can register for a 2-month free trial of Skillshare using the link in the description. Once you’ve registered, search for “investing 101” or follow the link I’ve left in the comments below. If you don’t know, Skillshare is the best online learning platform out there. It has thousands of different classes on a wide variety of topics, including business and the stock market. By the way, I want to thank all 2,000 of you who already watched my class: you’ve helped make it the most popular stock market class on Skillshare and I’m thankful for that. In fact I’m already working on a second series of videos that goes deeper into how companies work, including valuations, buybacks, multi-class stocks and a whole bunch of other fascinating topics. I’ll let you know when that course goes live, but until then make sure you’ve checked out Skillshare and my one course on it. Anyway, thanks for watching. If you’re new to Business Causal make sure to subscribe and also consider liking this video if you enjoyed it. As always, a big shoutout to my patrons on Patreon for supporting me and for being awesome. You’ll hear from me again in about two weeks and until then, stay smart.

Contents

Statutory description

By law, the appointments must yield a "fair representation of the financial, agricultural, industrial, and commercial interests and geographical divisions of the country".[1][2] As stipulated in the Banking Act of 1935, the Chair and Vice Chair of the Board are two of seven members of the Board of Governors who are appointed by the President from among the sitting Governors.[1][2]

The terms of the seven members of the Board span multiple presidential and congressional terms. Once a member of the Board of Governors is appointed by the president, he or she functions mostly independently. Such independence is unanimously supported by major economists.[3] The Board is required to make an annual report of operations to the Speaker of the U.S. House of Representatives.[4] It also supervises and regulates the operations of the Federal Reserve Banks, and the U.S. banking system in general. The Board obtains its funding from charges that it assesses on the Federal Reserve Banks, and not from the federal budget.

Membership is by statute limited in term, and a member that has served for a full 14 year term is not eligible for reappointment.[5] There are numerous occasions where an individual was appointed to serve the remainder of another member's uncompleted term, and has been reappointed to serve a full 14-year term.[5] Since "upon the expiration of their terms of office, members of the Board shall continue to serve until their successors are appointed and have qualified",[5] it is possible for a member to serve for significantly longer than a full term of 14 years. The law provides for the removal of a member of the Board by the President "for cause".[5]

The Chair and Vice Chair of the Board of Governors are appointed by the President from among the sitting Governors. They both serve a four-year term and they can be renominated as many times as the President chooses, until their terms on the Board of Governors expire.[1]

All seven board members of the Federal Reserve Board of Governors and five Federal Reserve Bank presidents direct the open market operations that sets U.S. monetary policy through their membership in the Federal Open Market Committee (FOMC).[6]

Records of the Federal Reserve Board of Governors are found in the Record Group n. 82 at the National Archives of the United States.[7]

Current members

Board of governors in April 2019, when two of the seven seats were vacant
Board of governors in April 2019, when two of the seven seats were vacant

The current members of the Board of Governors are as follows:[8]

Photo Governor Political party Entered office Term expires
Jerome H. Powell (cropped).jpg
Jerome Powell
(Chairman)
Republican February 5, 2018 (as Chairman)
May 25, 2012 (as Governor)
June 16, 2014 (new term)
February 5, 2022 (as Chairman)
January 31, 2028 (as Governor)
Richard Clarida official photo (cropped).jpg
Richard Clarida
(Vice Chairman)
September 17, 2018 (as Vice Chairman)
September 17, 2018
September 17, 2022 (as Vice Chairman)
January 31, 2022 (as Governor)
Randal Quarles official photo (cropped).jpg
Randal Quarles
(Vice Chairman for Supervision)
October 13, 2017 (as Vice Chairman for Supervision)
October 13, 2017
October 13, 2021 (as Vice Chairman for Supervision)
January 31, 2032 (as Governor)
Lael Brainard cropped.jpg
Lael Brainard Democratic June 16, 2014 January 31, 2026
Michelle Bowman (cropped).jpg
Michelle Bowman Republican November 26, 2018 January 31, 2020
Vacant January 31, 2024*
Vacant January 31, 2030*

*Indicates the date of term expiration for the individual nominated to this vacant position.

Nominated Members

President Donald Trump had nominated Marvin Goodfriend and Nellie Liang to fill the remaining two vacancies. Goodfriend and Liang had Senate Banking Committee hearings, and Goodfriend received a committee vote.[9] Liang withdrew herself as a nominee on January 7, 2019, after months passed without the full Republican-led Senate granting her a hearing.[10] Goodfriend's nomination expired with the new Congress in January 2019.[11] Trump then nominated Stephen Moore[12] and, later, Herman Cain[13]. Both Cain and Moore later withdrew their names from consideration.[14][15]

On July 3, 2019, President Trump announced that he will nominate Christopher Waller and Judy Shelton.

Committees

List of governors

Board of Governors meeting January 1, 1922.
Board of Governors meeting January 1, 1922.
Current and living former Governors, 2013
Current and living former Governors, 2013
Name[17] Bank Begin End Term (Years) Notes
Frederic A. Delano Chicago August 10, 1914 July 21, 1918 4
Paul M. Warburg New York August 10, 1914 August 9, 1918 4
William P.G. Harding Atlanta August 10, 1914 August 9, 1922 8 Chairman (1916–1922)
Adolph C. Miller San Francisco August 10, 1914 February 3, 1936 12
Charles S. Hamlin Boston August 10, 1914 February 3, 1936 12 Chairman (1914–1916)
Albert Strauss New York October 26, 1918 March 15, 1920 2
Henry A. Moehlenpah Chicago November 10, 1919 August 9, 1920 1
Edmund Platt New York June 20, 1920 September 14, 1930 10
David C. Wills Cleveland September 20, 1920 March 4, 1921 1
John R. Mitchell Minneapolis May 12, 1921 May 12, 1923 2
Milo D. Campbell Chicago March 14, 1923 March 22, 1923 <1 Died in office
Daniel R. Crissinger Cleveland May 1, 1923 September 15, 1927 4 Chairman (1923–1927)
Edward H. Cunningham Chicago May 14, 1923 November 28, 1930 7 Died in office
George R. James St. Louis May 14, 1923 February 3, 1936 13
Roy A. Young Minneapolis October 4, 1927 August 31, 1930 3 Chairman (1927–1930)
Eugene Meyer New York September 16, 1930 May 10, 1933 3 Chairman (1930–1933)
Wayland W. Magee Kansas City May 18, 1931 January 24, 1933 2
Eugene R. Black Atlanta May 19, 1933 August 15, 1934 1 Chairman (1933–1934)
J.J. Thomas Kansas City June 14, 1933 February 10, 1936 3
M.S. Szymczak Chicago June 14, 1933 May 31, 1961 28
Marriner S. Eccles San Francisco November 15, 1934 July 14, 1951 17 Chairman (1934–1948)
Joseph A. Broderick New York February 3, 1936 September 30, 1937 2
John K. McKee Cleveland February 3, 1936 April 4, 1946 10
Ronald Ransom Atlanta February 3, 1936 December 2, 1947 12 Died in office
Ralph W. Morrison Dallas February 10, 1936 July 9, 1936 <1
Chester C. Davis Richmond June 25, 1936 April 15, 1941 5
Ernest G. Draper New York March 30, 1938 September 1, 1950 12
Rudolph M. Evans Richmond March 14, 1942 August 13, 1954 12
James K. Vardaman, Jr. St. Louis April 4, 1946 November 30, 1958 12
Lawrence Clayton Boston February 14, 1947 December 4, 1949 3 Died in office
Thomas B. McCabe Philadelphia April 15, 1948 March 31, 1951 3 Chairman (1948–1951)
Edward L. Norton Atlanta September 1, 1950 January 31, 1952 1
Oliver S. Powell Minneapolis September 1, 1950 June 30, 1952 2
William McChesney Martin New York April 2, 1951 January 31, 1970 19 Chairman (1951–1970)
A.L. Mills, Jr. San Francisco February 18, 1952 February 28, 1965 13
J.L. Robertson Kansas City February 18, 1952 April 30, 1973 21
C. Canby Balderston Philadelphia August 12, 1954 February 28, 1966 12
Paul E. Miller Minneapolis August 13, 1954 October 21, 1954 <1 Died in office
Charles N. Shepardson Dallas March 17, 1955 April 30, 1967 12
G.H. King, Jr. Atlanta March 25, 1959 September 18, 1963 4
George W. Mitchell Chicago August 31, 1961 February 13, 1976 14
J. Dewey Daane Richmond November 29, 1963 March 8, 1974 11
Sherman J. Maisel San Francisco April 30, 1965 May 31, 1972 7
Andrew F. Brimmer Philadelphia March 9, 1966 August 31, 1974 8
William W. Sherrill Dallas May 1, 1967 November 15, 1971 5
Arthur F. Burns New York January 31, 1970 March 31, 1978 8 Chairman (1970–1978)
John E. Sheehan St. Louis January 4, 1972 June 1, 1975 3
Jeffrey M. Bucher San Francisco June 5, 1972 January 2, 1976 4
Robert C. Holland Kansas City June 11, 1973 May 15, 1976 3
Henry C. Wallich Boston March 8, 1974 December 15, 1986 12
Philip E. Coldwell Dallas October 29, 1974 February 29, 1980 6
Philip C. Jackson, Jr. Atlanta July 14, 1975 November 17, 1978 3
J. Charles Partee Richmond January 5, 1976 February 7, 1986 10
Stephen S. Gardner Philadelphia February 13, 1976 November 19, 1978 3 Died in office
David M. Lilly Minneapolis June 1, 1976 February 24, 1978 2
G. William Miller San Francisco March 8, 1978 August 6, 1979 1 Chairman (1978–1979)
Nancy H. Teeters Chicago September 18, 1978 June 27, 1984 6
Emmett J. Rice New York June 20, 1979 December 31, 1986 8
Frederick H. Schultz Atlanta July 27, 1979 February 11, 1982 3
Paul A. Volcker Philadelphia August 6, 1979 August 11, 1987 8 Chairman (1979–1987)
Lyle E. Gramley Kansas City May 28, 1980 September 1, 1985 5
Preston Martin[18] San Francisco March 31, 1982 April 30, 1986 4
Martha R. Seger Chicago July 2, 1984 March 11, 1991 7
Manuel H. Johnson Richmond February 7, 1986 August 3, 1990 4
Wayne D. Angell Kansas City February 7, 1986 February 9, 1994 8
H. Robert Heller San Francisco August 19, 1986 July 31, 1989 3
Edward W. Kelley, Jr. Dallas May 26, 1987 December 31, 2001 14
Alan Greenspan New York August 11, 1987 January 31, 2006 19 Chairman (1987–2006)
John P. LaWare Boston August 15, 1988 April 30, 1995 7
David W. Mullins, Jr. St. Louis May 21, 1990 February 14, 1994 4
Lawrence B. Lindsey Richmond November 26, 1991 February 5, 1997 5
Susan M. Phillips Chicago December 2, 1991 June 30, 1998 7
Alan S. Blinder Philadelphia June 27, 1994 January 31, 1996 2
Janet Yellen San Francisco August 12, 1994 February 17, 1997 3
Laurence H. Meyer St. Louis June 24, 1996 January 31, 2002 6
Alice M. Rivlin Philadelphia June 25, 1996 July 16, 1999 3
Edward M. Gramlich Richmond November 5, 1997 August 31, 2005 8
Roger W. Ferguson, Jr. Boston November 5, 1997 April 28, 2006 8
Mark W. Olson Minneapolis December 7, 2001 June 30, 2006 5
Susan S. Bies Chicago December 7, 2001 March 30, 2007 5
Ben S. Bernanke Atlanta August 5, 2002 June 21, 2005 3
Donald L. Kohn Kansas City August 5, 2002 September 1, 2010 8
Ben S. Bernanke Atlanta February 1, 2006 January 31, 2014 8 Chairman (2006–2014)
Kevin M. Warsh New York February 24, 2006 April 2, 2011 5
Randall S. Kroszner Richmond March 1, 2006 January 21, 2009 3
Frederic S. Mishkin Boston September 5, 2006 August 31, 2008 2
Elizabeth A. Duke Philadelphia August 5, 2008 August 31, 2013 5
Daniel Tarullo Boston January 28, 2009 April 5, 2017 8
Janet Yellen San Francisco October 4, 2010 February 3, 2018 7 Chair (2014–2018)
Sarah Bloom Raskin Richmond October 4, 2010 March 13, 2014 3
Jerome Powell New York May 25, 2012 January 31, 2028 (Incumbent) Chairman (2018–present)
Jeremy C. Stein Chicago May 30, 2012 May 28, 2014 2
Stanley Fischer New York May 28, 2014 October 13, 2017 3
Lael Brainard Richmond June 16, 2014 January 31, 2026 (Incumbent)
Randal Quarles Kansas City October 13, 2017 January 31, 2032 (Incumbent) Vice Chairman for Supervision (2017–present)
Richard H. Clarida September 17, 2018 January 31, 2022 Vice Chairman of the Fed

References

  1. ^ a b c d See 12 U.S.C. § 241
  2. ^ a b c Federal Reserve (January 16, 2009). "Board of Governors FAQ". Federal Reserve. Archived from the original on January 17, 2009. Retrieved 2009-01-16.
  3. ^ http://www.igmchicago.org/surveys/fed-appointments
  4. ^ 12 U.S.C. § 247.
  5. ^ a b c d See 12 U.S.C. § 242.
  6. ^ "The Three Key System Entities" (PDF). Board of Governors of the Federal Reserve System.
  7. ^ Richardson, Gary (February 2006). "Records of the Federal Reserve Board of Governors in Record Group 82 at the National Archives of the United States". Financial History Review: 12. doi:10.1017/S0968565006000084. Archived from the original on April 21, 2018. Retrieved April 21, 2018.
  8. ^ "FRB: Board Members". Federalreserve.gov. 2013-09-03. Retrieved 2014-01-11.
  9. ^ Long, Heather (September 19, 2018). "Trump nominates economist Nellie Liang to fill the last Federal Reserve board seat". The Washington Post.
  10. ^ Timiraos, Nick (January 7, 2019). "Nellie Liang Withdraws From Consideration for Fed Board Seat". The Wall Street Journal.
  11. ^ Croce, Brian (January 23, 2019). "Uncertainty surrounds Marvin Goodfriend's Fed board nomination". Pensions & Investments.
  12. ^ Timiraos, Nick (2019-03-22). "Trump Offers Fed Board Position to Economic Commentator Stephen Moore". Wall Street Journal. ISSN 0099-9660. Retrieved 2019-03-25.
  13. ^ Borak, Donna (2019-04-04). "Trump says he's recommending Herman Cain to Fed". CNN. Retrieved 2019-04-08.
  14. ^ Trump, Donald J. (2019-04-22). "My friend Herman Cain, a truly wonderful man, has asked me not to nominate him for a seat on the Federal Reserve Board. I will respect his wishes. Herman is a great American who truly loves our Country!". @realdonaldtrump. Retrieved 2019-05-02.
  15. ^ Trump, Donald J. (2019-05-02). "Steve Moore, a great pro-growth economist and a truly fine person, has decided to withdraw from the Fed process. Steve won the battle of ideas including Tax Cuts..." @realdonaldtrump. Retrieved 2019-05-02.
  16. ^ "About the Fed" on the Federal Reserve Board of Governors website
  17. ^ [1] Board of Governors of the Federal Reserve System. (n.d.). Board Members.
  18. ^ "Preston Martin - Federal Reserve History". www.federalreservehistory.org. Retrieved 19 March 2018.

External links

 This article incorporates public domain material from websites or documents of the National Archives and Records Administration.

This page was last edited on 3 July 2019, at 21:11
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