rm, while the other six have 14-year terms, with one member retiring every two years. If a governor should retire early, his successor takes over for what remains of his term. This system is intended to prevent a new occupant of the White House from packing the board with people of his political persuasion. The Federal Reserve Board sets the discount rate, but the real policy-making body for the Federal reserve is the Federal Open Market Committee (FOMC), which fixes the federal-funds rate, or the rate at which banks lend to one another, and decides monetary growth targets. There are seven board members on the committee, each with one vote, plus the 12 presidents of the district Federal Reserve banks, only five of whom can vote at any one time. The president of the Federal Reserve Bank of New York has a permanent vote, while the remaining four votes are shared among the other presidents in rotation for one-year terms. The 12 are not chosen by the president but by private citizens on the boards of their banks, subject to the approval of the governors of the Federal Reserve ("The rewards of independence: central banks: America v. Japan,", 1992, 19-20).
The Federal Reserve System was formed by an act of Co
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