The Dean’s List: Top Five Things You Should Know About the Federal Reserve

January 25, 2023

Sandeep Mazumder, dean at Baylor University's Hankamer School of Business, is well versed in Federal Reserve Systems and economics. He shared a list of the top five things you don’t know about the Federal Reserve System, clearing up the misconceptions.

  1. The group within the Federal Reserve who sets interest rates is called the Federal Open Market Committee (FOMC).
    The FOMC is made up of the governors and rotating Fed District Bank Presidents, although the N.Y. Fed President has a permanent seat since the N.Y. Fed is where their bond-buying and bond-selling activities take place.
  2. The Federal Reserve System is made up of 12 district banks and one Board of Governors.
    The district banks in turn have their own branches that work with them. Our closest Fed district bank is in Dallas.
  3. The Federal Reserve is not technically part of the government.
    They are more of a “quasi” governmental agency who reports periodically to the government, but their operations are not subject to daily oversight.
  4. Federal Reserve Governors have 14-year terms.
    These are very long terms, but this is by design to give governors of the Fed more independence from politicians.
  5. Governors of the Federal Reserve are not elected, and that’s a good thing!
    Otherwise, political factors and undue influence would shape how monetary policy is conducted, and history shows this can be dangerous and harmful for the economy.