The central agency that conducts monetary policy in the United States is the Federal Reserve System (the Fed). It was founded by Congress in 1913 under the Federal Reserve Act. The Fed is a highly independent agency that is insulated from day-to-day political pressures, accountable only to the Congress. It is a federal system, consisting of the Board of Governors, twelve regional Federal Reserve Banks (FRBs) and their twenty-five branches, the Federal Open Market Committee (FOMC), the Federal Advisory Council and other advisory and working committees, and more than 4,000 member banks, mostly national banks. By law, all federally chartered banks, i.e., national banks, are automatic members of the system. State-chartered banks may elect to become members.

The seven-member Board of Governors, headquartered in Washington, D.C., is the central agency of the Fed, overseeing the entire operation of U.S. monetary policy. The FRBs are the...