Question

“The Federal Reserve System resembles the U. S. Constitution in that it was designed with many checks and balances.” Do you agree? If so, discuss at least three distinctive features of the structure and organization of the Fed that provide with these checks and balances. If not, explain why

Answer 1

Federal Reserve System is the Apex body of the US Constitution which governs all the states of the US nation with utmost care of being not allowing any flaws inside the operating functions of all productive areas of the nation. It is obviously agreeable fact that the system of federal reserve was designed by checks and balances. I agree the fact of federal system having checks and balance in maintaining the cordial and smooth relationship with the people of all the states in the US nation. Let us discuss the three distinctive features of the structure and organization.

Firstly, in order to cut-short the imbalance of implementing monetary policy across the interior regions among all the states of the nation, Federal Reserve Bank has created 12 regional banks headed with governors with appropriate power. But the policy makers of the bank with the guidance of all the 12 governors cannot able to implement the monetary policy with the advantages of centralized action because all the influence of the political parties which pressurize all the local bodies to concentrate to solve the issue by their own plan of action. It actually restricts the benefits of adopting the monetary policy for the benefits for the entire states.

Secondly, The rules and regulations for the appointing 12 governors of the federal system is not an effective one. The senate team not able to appoint the qualified members of the body. Instead, the Governors are elected with the influential political background without proper academic credentials to manage and resolve the issues prevailing in the each states of the US. And also Governors also choose even the policy makers of their own choice occupying the half of the position in the federal system and helps to prepare the ineffective executive decision of monetary policies affecting the growth and development of all the states.

Thirdly, The Annual Budget Reports are not well transparently audited in federal system. The ruling party makes some favorable adjustments in the reports in order to nullify the effects of failure reflecting in the unprecedented allocation of resources in all the fields like education, employment, infrastructure, transport, etc. Checks and Balances are very well need to scrutinized well because the allocated funds are well used for the political parties development and for their own families economic development rather than using it for social development projects.