How the Federal Reserve System Functions Term Paper

How the Federal Reserve System Functions - Term Paper Examplethe Fed) is so profoundly interconnected with the entire political system of rules, the inevitably byproducts of central banks are business cycles ca make use ofd by politically-oriented monetary policies. Politicians use the Fed as a means of imposing fiscal policies that, although look good to constituents, ultimately exacerbate and damage the economy further (Bresiger, 2001). The following is an account of how the Fed is supposed to work, and the effects that the central banking system is supposed to have. An account of how it actually works is an entirely different matter. The Federal Reserve is, in fact, a tool under public control, overseen and manipulated by giving medication to accomplish the goal of a healthy, vibrant economy.As said before, the question of function is deeply rooted in the question of structure, which is in turn link causally to the history of the Fed. The Fed began with panics in the early 20 th century, wherein people raced to banks to withdraw deposits. A slim banking system at that clock time was overwhelmed, forcing Congress to draft the Federal Reserve Act, which, has been modified through time to encompass broader and wider responsibilities. The Fed was forced to find the virtuous mean between the moral responsibility of the government and the private interests of banks, which gave rise to countless checks and balances imposed on the system by government influences (Meltzer, 2004). Congress, of course, ever since the introductory establishment of the Fed, has regulated the system. Based on that, the Fed is answerable to Congress and must work within the Congressional system. However, the Fed still retains a certain level of self-rule in order to exculpate out its responsibilities apart from the political process (Lapidos, 2008).The Fed is composed primarily of three parts the batting order of Governors, the regional Reserve banks, and the Federal Open Market Committee. The first, the Board of Governors, is the agency of the Federal government adjust banks,