Federal Bank Regulatory Agencies of the United States

The Federal Reserve System

Established by the Federal Reserve Act in 1913, the Federal Reserve System is headed by a seven-member Board of Governors. Each is appointed to 14-year terms by the President of the United States. Why 14 years? To keep the President of the United States from selecting a majority of the Governors.

The Board of Governors is headquartered in Washington D.C.

While the Board of Governors are the head of The Federal Reserve System, it comprises 12 Federal Reserve Banks and 25 branches located throughout the country. Each Federal Reserve Bank has a a board of nine (9) directors. Six are elected by the member banks from its district. The other 3 are appointed by the Board of Governors.

Of the directors elected by the member banks, 3 represent member banks and 3 are from the business community. The 3 directors appointed by the Board of Governors are selected to represent the public (which basically means the Board of Governors).

The Federal Reserve System directly supervises (i.e. enforces) state-chartered banks that choose to become members. In addition to bank supervisory responsibilities, the Federal Reserv reviews membership applications from state banks and, together with state authorities, merger and branch proposals from state member banks.

The reason a state bank becomes a member bank is to bypass state banking laws and regulations. Or, at the very least, to avoid supervision by the state in which it operates. This gives the Federal Reserve control over a state's bank community and can override local concerns in favor of Federal Reserve interests.

Federal Bank Regulatory Agencies of the United States

Comptroller of the Currency

This is the oldest of the federal bank regulatory agencies. It was established by the Currency Act of 1863 and strengthened by the National Bank Act of 1864. The Comptroller is the primary supervisory agency for national banks.

Supervisory means enforcement while regulation means rule-making.

The Comptroller is a bureau of the Treasury Department and is headed by a single-person appointed by the President to a 5-year term. Of course, the question becomes, if a President has a 4-year term, doesn't that mean a 1-term President may not choose their own Comptroller. The answer is yes. This was done on purpose.

The Comptroller exercises control over the operations of national banks through a number of ways. Control includes...

the power to charter national banks,
the review of national bank branch and merger applications,
the implementation of regulations, and
examination and supervision of ALL national banks.

This means the Comptroller not only has oversight over national bank operations, but also determines who charters (starts) or expands a national bank. This is done through policy decisions. It is a lot of power for one person to have. And, to add to that, the Comptroller serves as a director of the FDIC.