The “Fed” is the Federal Reserve, otherwise known as our national banking system. There are 12 Federal Reserve banks scattered across the country; their job is to loan money to local banks, who then loan it to the people. The Fed is controlled by the Federal Reserve Board, which consists of seven governors chosen by the President and approved by the Senate. The Board’s responsibilities include determining monetary policy, making reports to Congress, overseeing national banks, consumer protection, and discount rates, and setting standard requirements for other banks or institutions that store money.

The most important thing the Board does is head up the Federal Open Market Committee (FOMC), which meets eight times a year to discuss monetary policy. The FOMC consists of the seven members of the Federal Reserve Board, the President of the Federal Reserve Bank of New York, and four of the other eleven Federal Reserve Bank Presidents, who take turns serving on the Committee. The FOMC votes to determine the discount rate (the interest rate at which the Federal Reserve lends to other banks), how much capital banks will be required to have on hand for financial security, and open market securities (how and with which companies the Federal Reserve will trade).