The Federal Reserve Chairman is the head of the Federal Reserve Bank of the United States, which is the country’s central bank. The official title is Chairman of the Board of Governors of the Federal Reserve System, but shorthand titles include Federal Reserve Chairman, Fed Chair, and Fed Chief. The President of the United States appoints the Fed Chair, who is then confirmed by the United States Senate. The term of this position is four years, but most Chairmen serve for multiple terms, up to a maximum of 14 years, plus any additional years if they are filling someone else’s term.
The idea of a central bank dates back to the founding of the country, with Alexander Hamilton’s suggestion leading to the establishment of the First Bank of the United States in 1791. The Second Bank of the United States was founded in 1816 to replace the First Bank, which had gone bankrupt. Many people opposed the idea of a central bank in the early days, and when President Andrew Jackson ran for re-election in 1836, he promised not to renew the bank’s charter, which he kept. There was no central bank in the United States until 1862, and there were only sporadic central banks until 1913.
A series of banking crises occurred in the early twentieth century, culminating in the Panic of 1907. As a result of this panic, the Federal Reserve Board was established in 1913 as part of the Federal Reserve Act. The Federal Reserve Board was governed by a Board of Directors, which was led by a chairman. At the time, his role was slightly different, as the Board had far less power than the current Federal Reserve, and even less than the twelve regional Federal Reserve Banks.
Each of these Federal Reserve Banks was led by a Governor, who wielded significant power over the nation’s banking system. Their title was changed to President with the Banking Act of 1935, and their power was greatly reduced. At the same time, the Federal Reserve’s board members were renamed Governors, and the modern Federal Reserve Chairman was appointed to lead them. The first Federal Reserve Chairman, Marriner S. Eccles, served until 1948, when his 14-year term limit was reached.
There have only been eight Federal Reserve Chairmen between 1934 and 2009, and each has wielded significant power and shaped the economic landscape of the United States. For many people, Alan Greenspan is the most recognizable Federal Reserve Chairman, having served from 1987 to 2006 and under four presidents. He has received both praise and criticism, particularly for his handling of the 1987 Black Monday crash and the technology-based boom period of the 1990s, and for what some consider to be his overstepping of the Fed Chair’s bounds.
The role of the Federal Reserve Chairman, in the end, is to prevent banking panics and to keep the economy healthy. The Federal Reserve can maintain a flexible currency by increasing the money supply, act as a lender of last resort if credit markets become frozen, serve as a central bank for other banks and the government, and manage federal funds for interbank lending. In addition to overseeing the twelve Federal Reserve Banks, the Federal Reserve Chairman is responsible for preparing a report to the Speaker of the House outlining the Bank’s economic strategy.