To safeguard the Federal Reserve from short-term political pressures, the Fed was set up to be “independent” within government. The Fed operates on its own earnings rather than on congressional appropriations, and the members of its Board of Governors are appointed for long, staggered terms, limiting the influence of day-to-day political considerations.

But the Federal Reserve works within government in the sense that it formulates monetary policy to achieve overall goals set by Congress and the U.S. president. Although the Federal Reserve’s specific decisions do not have to be approved by the president or the executive branch, the Fed must report to Congress, which created it. Congress has the power to alter or even abolish the Federal Reserve at any time.

The Fed’s unique structure also provides internal checks and balances, ensuring that its decisions and operations are not dominated by any one part of the system. The various parts of the Federal Reserve System and their basic functions are described in this brochure.