In the United States, the banking system is regulated by the Federal Reserve System, which also monitors the banking system and helps create banking policy within the country. The Federal Reserve System is run by the Federal Reserve Board of Governors, which is a federal agency in itself that runs the Federal Reserve System. The members of the Federal Reserve Board are appointed by the President of the United States, and their terms last fourteen years, meaning their tenure lasts through several presidential administrations. After appointment by the president, a candidate must be confirmed by the U.S. Senate to sit on the Federal Reserve Board of Governors.
The Federal Reserve System was created to address banking panic, which occurs at times throughout history before, during, and after depressions, recessions, or bank collapses. The Federal Reserve Board of Governors is tasked with overseeing the process of addressing such panics, and implementing systems and practices that will help prevent future panics and crises. They are equally responsible for protecting banks and banking assets as they are consumer rights.
The more difficult task of the Federal Reserve System and the Federal Reserve Board is to monitor monetary policy and the supply of money in the United States. Such management must be done in such a way that interest rates are effectively managed, prices of goods and services remain stable and are not subjected to prolonged periods of inflation or deflation, and that job growth is possible. These tasks often conflict with each other, making the reserve board's task difficult or sometimes impossible.
The Federal Reserve System is also the central bank for the United States. It acts much like a regular bank does to a common customer, but the reserve deals in transactions that can reach into the trillions of dollars. The Federal Reserve manages payments made to and by the United States within the country and to other countries, and it manages the balance of all money coming into the federal government. The Federal Reserve also sells savings bonds and other securities to maintain the balance of the account.
Private banks and financial institutions are regulated by the Federal Reserve System. The Federal Reserve is a centralized banking system, and when the agency was created, private banks worried that the government would then control all banking in the country. A compromise was made so that private banks could continue to operate independently and seek profits by doing so, but they would be regulated by the Federal Reserve.