by Norbert J. Michel
The Heritage Foundation
January 30, 2014
Backgrounder
The Federal Reserve is the official central bank of the United States and is responsible for U.S. monetary policy (altering the amount of money in an economy to promote economic growth and stability). This paper provides a brief overview of the Fed’s structure, purpose, and operations and discusses the implications of its recent policies. In general, the Fed conducts monetary policy by buying and selling securities, such as U.S. Treasuries. Since at least the 1950s, the Federal Reserve has actively tried to stabilize the private economy and thus calm business cycles, but the evidence suggests that the Fed has been largely ineffective at accomplishing its goals. The Fed’s 100th birthday offers a perfect time for Congress to assess its overall effectiveness, ideally by forming a formal congressional commission.



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