Federal Reserve Definition

The Federal Reserve System, informally known as The Fed, is the central banking system of the US. It was created in 1913 by congress and is a governmental entity with private components; a banking system composed of an appointed Board of Governors, the Federal Open Market Committee, regional Federal Reserve Banks, numerous private member banks, and several advisory councils. The Fed was created to maintain public confidence in banking, stabilize national banking practices, and to allow for greater centralization of banking processes. Today, The Fed is involved in most aspects of banking and sets many of the various interest rates used in national banking transactions. Many adjustable rate mortgages have an interest rate tied to an index rate controlled by The Fed.