Making Sense of the Federal Reserve
Introduction to the Board of Governors
At the core of the Federal Reserve System is the Board of Governors, or Federal Reserve Board. The Board of Governors, located in Washington, D.C., is a federal government agency that is the Fed's centralized component. The Board consists of seven members who are appointed by the president of the United States and confirmed by the Senate. These Governors guide the Federal Reserve's policy actions.
A Governor's term is 14 years. It is possible, however, for a Federal Reserve Governor to serve a longer term. For example, William McChesney Martin Jr. served as a member and Chairman of the Board of Governors for nearly 19 years because he was appointed as Chairman to complete another person's term and was then appointed to his own term.
Appointments to the Board of Governors are staggered—one Governor's term expires every two years. Terms are staggered to provide the Fed political independence as a central bank, ensuring that one president cannot take advantage of his power to appoint Governors by "stacking the deck" with those who favor his policies. The Board of Governors must be nonpartisan and act independently. In addition to independence, the staggered terms enable stability and continuity on the Board of Governors.
The seven Governors, according to the original Federal Reserve Act, should represent the nation’s financial, agricultural, industrial, and commercial interests. Geography is a factor, too, as every Governor must be selected from a different Federal Reserve District. Recently Congress directed that at least one of the Governors have experience in community banking. (In general, community banks can be defined as those owned by organizations with less than $10 billion in assets.) The seven Governors, along with a host of economists and support staff, write the policies that ensure financially sound banks and a stable and strong national economy.