The Federal Reserve, often called the Fed, is the central banking system of the United States. It was created by the Federal Reserve Act of 1913 to provide the country with a safe, flexible, and stable monetary and financial system, particularly to respond effectively to banking crises and financial panics

. The Federal Reserve System consists of three key components:

• The Board of Governors, a federal agency in Washington, D.C., which governs the system

• Twelve regional Federal Reserve Banks, each serving a specific geographic district in the U.S., which operate as the system's operating arms

• The Federal Open Market Committee (FOMC), which includes the Board of Governors and regional bank presidents, responsible for setting monetary policy such as interest rates

The Fed performs five key functions:

• Conducting national monetary policy to promote maximum employment, stable prices, and moderate long-term interest rates (its "dual mandate")

• Supervising and regulating banks and other financial institutions to ensure financial stability

• Maintaining the safety and efficiency of the payment and settlement systems

• Providing financial services to banks, the U.S. government, and foreign institutions, including managing the U.S. Treasury's accounts and issuing currency

• Promoting consumer protection and community development

As the U.S. central bank, the Fed acts as a "banker's bank" and the government's bank, playing a critical role in managing the money supply and interest rates through open market operations, discount lending, and reserve requirements

. It is politically independent, with its decisions not requiring approval from the president or Congress, and its board members serving staggered terms to ensure continuity

. In summary, the Federal Reserve is the cornerstone of the U.S. financial system, tasked with stabilizing the economy, regulating banks, and managing monetary policy to support economic growth and stability