All of these functions help to determine interest rates and credit standards and ensure liquidity in the banking system. In turn, this impacts investors and consumers in very direct ways (like the interest paid on mortgages) and somewhat indirect ways (like creating or removing an economic stimulus and controlling inflation 
).
2. How the Fed Is Organized
By understanding the structure of the Fed, you can ascertain which individuals hold the power in the body of the Fed, which controls each of the key banking rates, and how decisions are ultimately made.
So here is how the Fed is organized.
The Federal Reserve System is divided into 12 Federal Reserve Districts or Banks (Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas and San Francisco). Each district has its own president who heads up that district. Each of these banks has its own board of directors.
The Fed is headed up by a seven-member Board of Governors. The members of this board are appointed by the president of the U.S. and confirmed by the U.S. Senate. Each board member serves a 14-year term and can serve for onlya single term (in addition to completing the term of a vacant member). No more than one board member can be appointed from any single Fed district. The chairman (currently Ben Bernanke) and vice chairman (currently Donald Kohn) are appointed by the U.S. president and confirmed by the Senate to a four-year term.
Scott Rothbort
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