The Federal Reserve System was split into 12 districts by the Congress in an attempt to decentralize the system. It was a bid to reduce the risks and bureaucracies tied to having one central bank based in Washington as explained by Bech and Atalay (2010). It was realized that each section of the diverse and great American nation had diverse and different financial needs. As such, it was appropriate to separate the regions in such a way that no region would be left at the mercy of the other. 

The Board of Directors in the Federal Reserve System appears to be more important as it has the mandate to administer monetary policies. The board is made up of a majority of the Federal Open Market committee which holds 7 out of the 12 positions in the board. Monetary policies are used to determine the reserve requirements as well as setting discount rates (Mehran, Morrison, and Shapiro, 2011). This ensures that the economy is maintained at stable levels especially with regards to inflation. The Board goes further to influence guidelines that are used in the open market operations and influencing the national and international economic policies. The Board of Directors also conducts advisory services to the president with regards to economic policies. To underline its importance, the board exercises administrative controls over all individual Federal Reserve Banks. 

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The Dodd-Frank Wall Street Reform handed the Federal Reserve new responsibilities. The changes influenced consumers and their normal banking operations. The act was a safeguard against the likelihood of another financial meltdown. To do this it gives the Federal Government an array of options which can be used to respond to a meltdown if it occurs as described by Skeel (2010). The changes in the act include rules prescribing the interaction of the Fed Reserve with other federal financial regulatory agencies, and at other times recommending it to act solo. Such financial regulatory institutions include the Financial Stability Oversight Council (FSOC), the Consumer Financial Protection Bureau (CFPB), and the Office of Credit Ratings. The rules have required a higher liquidity ratio for financial institutions and strengthening the regulatory oversight of American banks operations. the capital requirements for large banks have also been increased in the act. The Dodd-Frank Act aimed at stopping mortgage companies and financial lenders from taking advantage of consumers. The Act gives the Fed the powers to bring to compel a commercial bank to develop plans for quick shutdowns especially if such a bank approaches critical run-outs of money or bankruptcy. The Fed was given the mandate to conduct an annual stress test for banks with more than $50 billion in assets to ensure that such institutions can survive significant financial crisis. 


Bech, M. L., & Atalay, E. (2010). The topology of the federal funds market. Physica A: Statistical Mechanics and its Applications, 389(22), 5223-5246.

Mehran, H., Morrison, A., & Shapiro, J. (2011). Corporate governance and banks: What have we learned from the financial crisis?.Skeel, D. (2010). The new financial deal: understanding the Dodd-Frank Act and its (unintended) consequences. John Wiley & Sons.

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