By BankingMyWay.com Staff
His face is seen plastered across newspapers, online magazines and cable news programs on a daily basis these days, but many Americans don’t know who Ben Bernanke is or what he does.

His face is seen plastered across newspapers, online magazines and cable news programs on a daily basis these days, but many Americans don’t know who Ben Bernanke is or what he does.

Ben Bernanke is the Chairman of the Board of Governors for the Federal Reserve System. The Federal Reserve, informally called The Fed, is the United States’ central banking system. It is considered an independent government entity because its decisions are not ratified by the President or Congress, and it does not receive funding from Congress. The Fed is charged with managing the nation’s monetary policy, and as Chairman, Bernanke is charged with managing that effort. 

Ben Bernanke succeeded Alan Greenspan as Fed Chair in February 2006. Originally from Georgia and raised in South Carolina, Bernanke was a professor at Stanford Graduate School of Business, New York University and Princeton University before joining the Board of Governors in 2002. He has now been Fed Chair for just over three years.

The Fed Chair heads the Board of Governors of the Federal Reserve. This board is a seven-member body, which oversees 12 District Reserve Banks. Board members are appointed by the President and confirmed by the Senate to 14-year single terms. The Chair and Vice-Chair are also appointed from the members of the board by the President and confirmed by Senate. They serve four-year terms in these roles and can be reappointed.

While the Federal Reserve operates outside of the control of Congress, it is accountable to Congress. By law, Fed officials must report to Congress twice a year on monetary policy and once a year to the Speaker of the House. Usually, the Fed Chair reports to Congress. Additionally, Fed officials testify before Congress when called.

The main responsibility of the Federal Reserve is to maintain the health of the economy, with the goal of full employment and stable prices. The Federal Reserve’s main tool to implement monetary policy is to set key interest rates, including the discount rate and the federal funds rate. The discount rate is the interest rate that the Central Bank charges for loans, and the federal funds rate is the rate for loans between banks. Historically, the discount rate has been about 1% higher than the target federal funds rate, but that margin has decreased to between 0.25% and 0.50% since the onset of the credit crunch.

Manipulation of interest rates sets the price of borrowing. When the Fed lowers interest rates, rates on consumer loans and banking products also go down. This dramatically impacts the nation’s money supply. The Fed adjusts interest rates to both spur growth and control inflation. In this current credit crisis, the Fed has lowered the interest rates to practically 0% in an effort to increase the money supply and get the economy moving.

As the head of the Federal Reserve, Bernanke is often ultimately held responsible for interest rate adjustments, but the Chair does not make these decisions alone. The Federal Open Market Committee (FOMC), which meets eight times a year, oversees open market operations and sets target interest rates. The FOMC is made up of the seven member of the Board of Governors, five regional Reserve Bank Presidents. Monetary policy is deliberated within the committee, but the Fed Chair is still the public face of the Federal Reserve System.

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