Federal Open Market Committee in the United States

The Federal Open Market Committee comprises the Board of Governors and five of the presidents of the Reserve Banks. The Chairman of the Board of Governors is traditionally the Chairman of the Committee. The president of the Federal Reserve Bank of New York serves as a permanent member of the Committee. Four of the twelve Reserve Bank presidents rotate annually as members of the Committee.

Open market operations of the Reserve Banks are conducted under regulations adopted by the Committee and pursuant to specific policy directives issued by the Committee, which meets in Washington, DC, at frequent intervals. Purchases and sales of securities in the open market are undertaken to supply bank reserves to support the credit and money needed for long-term economic growth, to offset cyclical economic swings, and to accommodate seasonal demands of businesses and consumers for money and credit. These operations are carried out principally in U.S.

Government obligations, but they also include purchases and sales of Federal agency obligations. All operations are conducted in New York, where the primary markets for these securities are located; the Federal Reserve Bank of New York executes transactions for the Federal Reserve System Open Market Account in carrying out these operations.

Under the Committee’s direction, the Federal Reserve Bank of New York also undertakes transactions in foreign currencies for the Federal Reserve System Open Market Account. The purposes of these operations include helping to safeguard the value of the dollar in international exchange markets and facilitating growth in international liquidity in accordance with the needs of an expanding world economy.

Federal Reserve Banks The 12 Federal Reserve Banks are located in Atlanta, GA; Boston, MA; Chicago, IL; Cleveland, OH; Dallas, TX; Kansas City, MO; Minneapolis, MN; New York, NY; Philadelphia, PA; Richmond, VA; San Francisco, CA; and St. Louis, MO. Branch banks are located in Baltimore, MD; Birmingham, AL; Buffalo, NY; Charlotte, NC; Cincinnati, OH; Denver, CO; Detroit, MI; El Paso, TX; Helena, MT; Houston, TX; Jacksonville, FL; Little Rock, AR; Los Angeles, CA; Louisville, KY; Memphis, TN; Miami, FL; Nashville, TN; New Orleans, LA; Oklahoma City, OK; Omaha, NE; Pittsburgh, PA; Portland, OR; Salt Lake City, UT; San Antonio, TX; and Seattle, WA. Reserves on Deposit The Reserve Banks receive and hold on deposit the reserve or clearing account deposits of depository institutions. These banks are permitted to count their vault cash as part of their required reserve. Extensions of Credit The Federal Reserve is required to open its discount window to any depository institution that is subject to its reserve requirements on transaction accounts or nonpersonal time deposits. Discount window credit provides for Federal Reserve lending to eligible depository institutions under two basic programs. One is the adjustment credit program; the other supplies more extended credit for certain limited purposes. Short-term adjustment credit is the primary type of Federal Reserve credit. It is available to help borrowers meet temporary requirements for funds. Borrowers are not permitted to use adjustment credit to take advantage of any spread between the discount rate and market rates. Extended credit is provided through three programs designed to assist depository institutions in meeting longer term needs for funds. One provides seasonal credit—for periods running up to 9 months—to smaller depository institutions that lack access to market funds. A second program assists institutions that experience special difficulties arising from exceptional circumstances or practices involving only that institution. Finally, in cases where more general liquidity strains are affecting a broad range of depository institutions— such as those whose portfolios consist primarily of longer term assets—credit may be provided to address the problems of particular institutions being affected by the general situation. Currency Issue The Reserve Banks issue Federal Reserve notes, which constitute the bulk of money in circulation. These notes are obligations of the United States and are a prior lien upon the assets of the issuing Federal Reserve Bank. They are issued against a pledge by the Reserve Bank with the Federal Reserve agent of collateral security including gold certificates, paper discounted or purchased by the Bank, and direct obligations of the United States. Other Powers The Reserve Banks are empowered to act as clearinghouses and as collecting agents for depository institutions in the collection of checks and other instruments. They are also authorized to act as depositories and fiscal agents of the United States and to exercise other banking functions specified in the Federal Reserve Act. They perform a number of important functions in connection with the issue and redemption of United States Government securities.

For further information, contact the Office of Public Affairs, Board of Governors, Federal Reserve System, Washington, DC 20551. Phone, 202–452–3204 or 202–452–3215. Internet, http://www.federalreserve.gov

Federal Open Market Committee

In Legislation

Federal Open Market Committee in the U.S. Code: Title 12, Chapter 3, Subchapter IV

The current, permanent, in-force federal laws regulating federal open market committee are compiled in the United States Code under Title 12, Chapter 3, Subchapter IV. It constitutes “prima facie” evidence of statutes relating to Banking Law (including federal open market committee) of the United States. The reader can further narrow his/her legal research of the general topic (in this case, Federal Reserve System of the US Code, including federal open market committee) by chapter and subchapter.