Understanding the Fed: Federal Reserve System vs. Federal Reserve Board vs. Federal Reserve Banks

Back to Basics: Federal Reserve System vs. Federal Reserve Board vs. Federal Reserve Banks

When people mention “the Fed”, they’re often referring to the powerful entity that sets U.S. interest rates and guides the economy. But what exactly is “the Fed”? Is it a single institution? A government agency? A network of banks?

Let’s clear up the confusion by breaking down the three core components of the Federal Reserve:

1. Federal Reserve System – The Whole Central Banking Framework

The Federal Reserve System is the official name of the U.S. central bank, created in 1913 by Congress to promote a stable monetary and financial system. It consists of:

  • The Board of Governors in Washington, D.C.
  • 12 Regional Federal Reserve Banks
  • The Federal Open Market Committee (FOMC)

It is a public-private hybrid: part of it is a government agency, and part of it operates like a private corporation. The System’s purpose is to manage inflation, supervise banks, maintain financial stability, and support the U.S. payment system.

2. Federal Reserve Board – The Policy-Making Brain

The Board of Governors is the governing body of the entire Federal Reserve System. It is a U.S. government agency, located in Washington, D.C., and made up of seven members appointed by the President and confirmed by the Senate. The Board:

  • Sets monetary policy, including interest rates and reserve requirements
  • Oversees the 12 regional Federal Reserve Banks
  • Regulates and supervises banks and financial institutions
  • Plays a leading role in the Federal Open Market Committee (FOMC)

The Chair of the Board (currently Jerome Powell as of this writing) is the public face of the Fed and often what people mean when they say, "The Fed raised interest rates."

3. Federal Reserve Banks – The Operational Arms

There are 12 Regional Federal Reserve Banks, each serving a geographic district. These are not government agencies—they are quasi-public institutions owned by the private banks in their region. However, they serve public purposes. Each Reserve Bank:

  • Implements monetary policy at the regional level
  • Supervises and examines member banks
  • Provides services such as check clearing, electronic payments, and distributing currency
  • Conducts economic research

The Federal Reserve Bank of New York is the most prominent, handling open market operations and serving as the fiscal agent for the U.S. Treasury.

📌 So… Who Is “The Fed”?

When someone says “the Fed”, they usually mean one of the following:

Context “The Fed” Refers To…
News headlines (“The Fed raised rates”) The Board of Governors and FOMC
Economic discussions The entire Federal Reserve System
Monetary policy implementation Often the Federal Reserve Bank of New York

Quick Comparison Table

Component Role Structure Government Agency?
Federal Reserve System The full U.S. central bank Hybrid: Board + Banks + FOMC Mixed (some parts yes, some no)
Federal Reserve Board Policy setting and supervision 7 governors, D.C.-based Yes
Federal Reserve Banks Policy execution and regional services 12 regional banks, quasi-public No

Visual Diagram: The Structure of “The Fed”

🧩 Final Thought

The Federal Reserve is not just one thing—it’s a complex system that combines public oversight with private participation to safeguard the U.S. economy. Understanding how the Board, the Banks, and the System fit together gives you clearer insight into how “the Fed” shapes your financial world, from interest rates to inflation and beyond.

Visit GLOBAL ABAS for more insights.

Disclaimer: This post is for informational purposes only and does not constitute financial, legal, or investment advice. Please consult a qualified professional for guidance tailored to your situation.

For personalized support, contact GLOBAL ABAS Consulting, LLC with your specific questions or concerns.

Your feedback helps us improve the Finance Terms series — share your thoughts in the comments below.

Copyright © 2025 GLOBAL ABAS Consulting, LLC. All rights reserved.

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