The Federal Reserve Chair

Learning Outcomes

  • Explain the structure and key functions of the Federal Reserve

Who Has the Most Immediate Economic Power in the World?

Janet Yellen

Figure 2. U.S. Secretary of the Treasury and former Chair of the Federal Reserve Board. Janet L. Yellen was the first woman to hold the position of chair of the Federal Reserve Board of Governors

What individual can make the financial market crash or soar just by making a public statement? It’s not Bill Gates or Warren Buffett. It’s not even the president of the United States. The answer is the chair of the Federal Reserve Board of Governors. In early 2014, Janet L. Yellen, shown in Figure 2, became the first woman to hold this post.

With a PhD in economics from Yale University, Yellen has taught macroeconomics at Harvard, the London School of Economics, and most recently at the University of California at Berkeley. From 2004–2010, Yellen was president of the Federal Reserve Bank of San Francisco. More than two years before the 2008 financial crisis, Yellen was one of the few economists who warned about a possible bubble in the housing market. Foreseeing such potential shocks to the economy and taking preventive measures to put appropriate safeguards in place is an important function of the Fed. The Fed chair is first among equals on the board of governors. While he or she has only one vote, the chair controls the agenda, and is the public voice of the central bank, so he or she has more power and influence than one might expect.

The Federal Reserve is more than the board of governors. The Fed also includes twelve regional Federal Reserve banks, each of which is responsible for supporting the commercial banks and economy generally in its district. The Federal Reserve districts and the cities where their regional headquarters are located are shown in Figure 3. The commercial banks in each district elect a board of directors for each regional Federal Reserve bank, and that board chooses a president for each regional Federal Reserve district. Thus, the Federal Reserve System includes both federally and private-sector appointed leaders.

This map of the United States shows the 12 Federal Reserve districts. Appropriate alternative text can be located in the table below this image.

Figure 3. The Twelve Federal Reserve Districts. There are twelve regional Federal Reserve banks, each with its own district.

The Federal Reserve Districts and Their Territories
District Number Head Office Location Territories Covered
1 Boston, Massachusetts The state of Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont; and all but Fairfield County in Connecticut.
2 New York, New York The state of New York; Fairfield County in Connecticut; and 12 counties in northern New Jersey, and serves the Commonwealth of Puerto Rico and the U.S. Virgin Islands.
3 Philadelphia, Pennsylvania The state of Delaware; nine counties in southern New Jersey; and 48 counties in the eastern two-thirds of Pennsylvania.
4 Cleveland, Ohio The state of Ohio; 56 counties in eastern Kentucky; 19 counties in western Pennsylvania; and 6 counties in northern West Virginia.
5 Richmond, Virginia. The states of Maryland, Virginia, North Carolina, and South Carolina; 49 counties constituting most of West Virginia; and the District of Columbia.
6 Atlanta, Georgia The states of Alabama, Florida, and Georgia; 74 counties in the eastern two-thirds of Tennessee; 38 parishes of southern Louisiana; and 43 counties of southern Mississippi.
7 Chicago, Illinois The state of Iowa; 68 counties of northern Indiana; 50 counties of northern Illinois; 68 counties of southern Michigan; and 46 counties of southern Wisconsin.
8 St. Louis, Missouri The state of Arkansas; 44 counties in southern Illinois; 24 counties in southern Indiana; 64 counties in western Kentucky; 39 counties in northern Mississippi; 71 counties in central and eastern Missouri; the city of St. Louis; and 21 counties in western Tennessee.
9 Minneapolis, Minnesota. The states of Minnesota, Montana, North Dakota, and South Dakota; the Upper Peninsula of Michigan; and 26 counties in northern Wisconsin.
10 Kansas City, Missouri The states of Colorado, Kansas, Nebraska, Oklahoma, and Wyoming; 43 counties in western Missouri; and 14 counties in northern New Mexico.
11 Dallas, Texas The state of Texas; 26 parishes in northern Louisiana; and 18 counties in southern New Mexico
12 San Francisco, California The states of Alaska, Arizona, California, Hawaii, Idaho, Nevada, Oregon, Utah, and Washington, and serves American Samoa, Guam, and the Commonwealth of the Northern Mariana Islands