The Federal Reserve is the central bank of the United States.

Its unique structure

includes: a federal government agency, the Board of Governors, in Washington, D.C.,
and 12 regional Reserve Banks.
On December 23, 1913, the Federal Reserve System, which serves as the nation's

central bank, was created by an act of Congress. The System consists of a seven-member
Board of Governors with headquarters in Washington, D.C., and twelve Reserve Banks
located in major cities throughout the United States.
The seven members of the Board of Governors are appointed by the President and
confirmed by the Senate to serve 14-year terms of office. Members may serve only one
full term, but a member who has been appointed to complete an unexpired term may be
reappointed to a full term.
The primary responsibility of the Board members is the formulation of monetary
policy.
The Board sets reserve requirements and shares the responsibility with the
Reserve Banks for discount rate policy. These two functions plus open market
operations constitute the monetary policy tools of the Federal Reserve System.
In addition to monetary policy responsibilities, the Federal Reserve Board has
regulatory and supervisory responsibilities over banks that are members of the System,
bank holding companies, and international banking facilities in the United States, Edge
Act and agreement corporations, foreign activities of member banks, and the U.S.
activities of foreign-owned banks. The Board also sets margin requirements, which limit
the use of credit for purchasing or carrying securities.

, the Board of Governors, the 12 Federal Reserve Banks, and the Federal Reserve
System as a whole are all subject to several levels of 1 audit – e and review:
The Board's financial statements, and its compliance with laws and regulations
affecting those statements, are audited annually by an 3 outside auditor – d retained by
the Office of Inspector General (OIG)
  Completed and active GAO reviews and completed OIG audits, reviews,
and assessments 4 are listed – c in the Board's Annual Report. The 5 financial statements -
b of the Reserve Banks are also audited annually by an independent outside auditor.
Each week, the Federal Reserve publishes its 6 balance sheet and charts – a of recent
balance sheet trends. In addition, the Reserve Banks are subject to 7 annual examination –
g by the Board. The Board's financial statements and the combined financial statements
for the Reserve Banks are published in the Board's 8 Annual Report - h

Monetary policy works through the market for reserves and involves the federal
funds rate. A change in the reserves market will trigger a chain of events that affect
other short-term interest rates, foreign exchange rates, long-term interest rates, the
amount of money and credit in the economy, and levels of employment, output, and
prices
A change in short-term interest rates will also translate into changes in long-term
rates on such financial instruments as home mortgages, corporate bonds, and Treasury
bonds, especially if the change in short-term rates is expected to persist.
Higher long-term interest rates will reduce the demand for items that are most
sensitive to interest cost, such as business investment, and durable consumer goods (for
example, automobiles and large household appliances). Higher mortgage interest rates
depress the demand for housing. Higher corporate bond rates increase the cost of
borrowing for businesses and, thus, restrain the demand for additions to plants and
equipment; and tighter supplies of bank credit may constrain the demand for investment
goods by those firms particularly dependent on bank loans.
Beyond these effects, consumption demand is lowered by a reduction in the value
of household assets—such as stocks, bonds, and land—that tends to result from higher
long-term interest rates.
Such changes in the demand for goods and services get translated into changes in
total production and prices. Lessened demand resulting from higher interest rates and the
stronger dollar tends to reduce production and thereby relieve pressures on resources.
Production is the first to respond to monetary policy actions; prices and wages respond
only later., price and wage levels adjust to the slower rate of expansion of aggregate
demand, and the economy gravitates toward full employment of resources.