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11 16 2015 | by Victor Xing | Central Banks

Who is responsible for oversight of the Federal Reserve

Senior officials at the Federal Reserve (5 current members of the Board of Governors as well as Presidents of the 12 Federal Reserve Banks) shape the central bank’s major regulatory, monetary policy, financial services, as well as administrative (hiring, etc) decisions, but the Federal Reserve System is still subject to additional oversight by outside entities.

The Federal Reserve is subject to oversight by the Congress (namely Senate Committee on Banking, Housing, and Urban Affairs and House Committee on Financial Services).  Additionally, the Government Accountability Office (GAO) conducts reviews and audits at the direction of the Congress and also under its own authority.

The most visible form of oversight is seen during the semi-annual Humphrey Hawkins testimony (also known as the Monetary Policy Report)

Example of Congressional oversight - Chair Yellen at the semi-annual Humphrey Hawkins testimony
Chair Yellen at the semi-annual Humphrey Hawkins testimony

The Federal Reserve’s external auditor is currently Deloitte, and its most recent audit is available here.

Oversight of the 12 Federal Reserve Banks are slightly different: each Reserve Bank’s board of directors selects its own Presidents (subject to approval by the Board of the Governors), and the Reserve Banks have their independent internal audit functions.

In essence, the Federal Reserve is self-governed and self-funded with oversight by the Congress and other federal agencies, and there is no external person or agency that controls the central bank.

Next article11 13 2015 | by Victor Xing | Financial Models

Is financial engineering useful?