The Fed's Regional Structure
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Now that you know who we are at the Federal Reserve—1) the Board of Governors, as the federal government agency; 2) the Reserve banks, as the operational arms; and 3) the FOMC, as the committee that sets monetary policy, let's move on to what we do. We'll describe some of the activities we do that carry out the Fed's three main responsibilities: conducting monetary policy, supervising banks and providing financial services.
First, let's get a perspective on the Fed's regional structure. This map highlights the 12 Reserve banks and their 25 branch locations. You'll note that each Bank is identified with a corresponding letter and number. We use this coding to identify Federal Reserve districts. The Treasury uses it as well. Take a look at a U.S. $1 bill—it features the letter and number of the Fed district that first placed that bill into circulation.
Reserve banks are the decentralized components that carry out the Fed's policies at a regional level. Day to day, the banks execute the laws written by Congress and the regulatory policies written by the Board of Governors. The banks also play a critical role in bringing local economic perspectives to the national arena.
For example, an economist at a Reserve bank may learn of the anticipated expansion or shutdown of a major local employer. Such news will obviously affect the local economic outlook, but will it have an impact on the national economy? The economist's proximity to the region and expertise about it can help policymakers who participate in FOMC discussions evaluate whether regional pockets of economic data skew the national picture or reflect it.
Also, because Reserve banks' staff members interact directly with local bankers—examining their books and offering financial services—they are knowledgeable about the effects of national policies on local bankers and can funnel that information to the Board of Governors.
The Reserve banks do much more than just add regional perspectives, though. The banks also contribute to the ongoing exchange of ideas across the Federal Reserve System that allows the Fed to make better policy. This tradition of independent thought is one of the beauties of the Fed's decentralized structure.
