Jerome Powell: America's Central Bank - the history and structure of the Federal Reserve

Speech by Mr Jerome H Powell, Member of the Board of Governors of the Federal Reserve System, at the West Virginia University College of Business and Economics Distinguished Speaker Series, Morgantown, West Virginia, 28 March 2017.

I am delighted to have this opportunity to speak at West Virginia University. Thanks to Brian Cushing for inviting me here today.

Gathered in this part of West Virginia, we are located in the Fifth Federal Reserve District, which stretches down from here to South Carolina and east to the Atlantic Ocean (figure 1). More than 100 years ago, the organizers of the Federal Reserve System divided the country into 12 of these Districts, each with its own Federal Reserve Bank. Together, the Board of Governors in Washington and the 12 Reserve Banks are the key elements of the Federal Reserve System.

Today I will discuss how the Federal Reserve came to have this unique structure. The Fed's organization reflects a long-standing desire in American history to ensure that power over our nation's monetary policy and financial system is not concentrated in a few hands, whether in Washington or in high finance or in any single group or constituency. Rather, Americans have long desired that decisions about these matters be influenced by a diverse set of voices from all parts of the country and the economy. The structure of the Federal Reserve was designed to achieve this broad representation and promote a stronger financial system to build resiliency against the sort of periodic financial crises that had repeatedly damaged the country in the 19th and early 20th centuries. This structure was forged from compromise; the result of that compromise was a vitally needed central bank whose decisions take into account a broad range of perspectives.