Act of Congress Federal Reserve Act

[GoldBlooded]

House: 5-3-1
Senate: 3-2-0

A
BILL
To

Establish the Federal Reserve Bank System​

The people of the Commonwealth of Redmont, through their elected Representatives in the Congress and the force of law ordained to that Congress by the people through the constitution, do hereby enact the following provisions into law:

1 - Short Title and Enactment
(1) This Act may be cited as the 'Federal Reserve Act.'
(2) This Act shall be enacted upon its signing.
(3) This Act has been authored by: President xLayzur
(4) This Act has been co-sponsored by: Sen. MilkCrack

2 - Reasons
(1) The purpose of this Act is to establish a central banking system known as the Federal Reserve, which shall serve as the principal entity for managing the monetary policy and financial stability of the Commonwealth.
(2) The Federal Reserve shall consist of a Board of Governors, Commercial Board Members, and other advisory councils to carry out its functions. This comprehensive ensemble shall diligently execute the intricate array of functions delegated to them by this statute, thereby cementing the Federal Reserve's integral role in fostering a resilient and prosperous economic environment for the Commonwealth.

3 - Responsibilities
(1) The Federal Reserve bares the primary responsibility for shaping and executing policies related to money. Its focus is on achieving two main goals: maintaining a healthy job market and keeping prices stable. This means striving for plenty of jobs for workers and making sure the value of money doesn't change too quickly.
(2) To achieve these goals, the Federal Reserve consistently examines various signals that show how the economy is doing. This includes looking at things like how many people are working, trends in financial markets, and data about jobs. By doing this, the Federal Reserve can make smart decisions about what policies to put in place to handle both short-term ups and downs and long-term trends.
(3) The Federal Reserve also has the power to oversee and guide banks and other financial institutions. Its job is to ensure the financial system is strong and sturdy, so it can withstand challenges. By carefully watching over these institutions and their activities, the Federal Reserve can spot problems before they get too big and work to prevent them from causing widespread issues.
(4) The Federal Reserve steps in as a kind of emergency help. It offers money to banks that might be running low, helping them stay afloat during tough times. By doing this, the Federal Reserve stops problems in the banking system from affecting the entire economy.
(5) The Federal Reserve operates within a complex mix of economic factors. Its experts use their knowledge to achieve the best results for the Commonwealth. This means creating an environment where there are enough good jobs, the economy grows at a steady pace, and the prices we pay for things remain steady. This work helps workers, keeps the financial system strong, and makes sure the value of our money is reliable.

4 - Internal Structure and Governance
(1) Board of Governors:

(a) The Federal Reserve shall be structured around a Board of Governors, a central body composed of five members, each of whom shall be appointed by the President and subject to confirmation by the Senate.​

(b) The Board of Governors shall reflect a diverse range of expertise, backgrounds, and perspectives, ensuring comprehensive decision-making.​

(2) Internal Governance Process:

(a) The selection of the Reserve Governor and Lieutenant Governor shall occur through a internal governance process. This process shall involve nomination by fellow Governors, followed by debate, evaluation of qualifications, and a final election conducted by the entire Board. This meticulous procedure shall ensure that the appointed officials align with the Federal Reserve's objectives and values. This selection process will be taken place in a designated discord channel within the FRB Discord.​

(3) Reserve Governor & Lieutenant Governor:

(a) Within the Board of Governors, two positions shall be designated – the Reserve Governor and the Lieutenant Governor.​

(b) The Reserve Governor shall serve as the principal representative of the Federal Reserve, responsible for communicating with the public, leading policy discussions, and guiding the institution's strategic direction.​

(c) The Lieutenant Governor shall serve as the second-in-command, ready to fulfill the Reserve Governor's duties if needed.​

(d) The Reserve Governor is entitled to an in-game role. This management of this role is exercised on behalf of the President by the Secretary of Commerce.​

(4) Commercial Board:

(a) The Commercial Board will include members from various financial institutions, including commercial banks, credit unions, and other relevant financial organizations. To ensure diversity and inclusivity, members should represent different sizes and types of financial institutions.​

(b) Members of the Commercial Board will act as an advisory board for the Federal Reserve and holds no physical power.​

(c) Functions and Responsibilities:​

(i) Regulatory Guidance: The Commercial Board would serve as an advisory body to regulatory agencies and the government on issues related to financial regulation. Their expertise and insights would be invaluable in crafting effective regulations that balance financial stability and industry growth.​

(ii) Risk Assessment: The board could monitor and assess systemic risks within the financial sector, offering early warnings of potential issues. This function would be essential for maintaining financial stability.​

(iii) Policy Recommendations: Members of the Commercial Board could provide recommendations on policy changes and regulatory adjustments that impact financial institutions. These recommendations should be based on their collective expertise and a deep understanding of the industry.​

(iv) Research and Analysis: The Commercial Board could commission or conduct research on issues affecting the financial sector. This research could inform policy discussions and lead to data-driven decision-making.​

5 - Monetary Policy Tools
(1) The Federal Reserve shall have exclusively have the following powers:

(a) Open Market Operations​

(i) Open Market Operations is when the Reserve Bank buys government securities, such as Treasury bonds or notes, from banks, financial institutions, or the public.​

(b) Forward Market Operations​

(i) Agreements made by the Reserve Bank to buy or sell securities at a future date. This can be used to manage liquidity and interest rates over a longer timeframe.​

(c) Discount Rate​

(i) The discount rate is the interest rate at which commercial banks can borrow funds from the central bank. By changing the discount rate, the central bank influences the cost of borrowing for banks and, consequently, lending rates in the broader economy.​

(d) Quantitative Easing (QE)​

(i) In times of economic crisis or low inflation, the Reserve Bank can implement QE. This involves purchasing longer-term securities or other assets to increase the money supply and lower long-term interest rates.​

(e) Reserve Requirements​

(i) The Reserve Bank sets reserve requirements, which are the minimum amounts of funds that banks must hold in reserve against their deposits. By adjusting these requirements, the central bank affects the amount of money banks can lend and the money multiplier.​

(f) Interest Rates​

(i) The Reserve bank can directly influence short-term interest rates, such as the federal funds rate, through its policy rate decisions. Changes in the policy rate impact borrowing costs for consumers and businesses.​

(g) Player Balance​

(i) The Reserve Bank can determine the amount of capital a player starts will upon joining DemocracyCraft for the first time.​

(h) Voting Rewards​

(i) The Reserve Bank can determine the amount of capital a player receives from Server Vote Rewards.​

(i) Governing Costs​

(i) The Reserve Bank can determine resource requirements for certain functions, activities, or practices of the Government.​

6 - Process of Currency Minting
(1) The Board of Governors must vote on a motion to mint new currency into the economy by a supermajority.

(a) Upon the passage of the motion to mint currency, the action of minting currency will be carried out by the Secretary of the Department of Commerce.​

(i) Clause: The Federal Reserve solely has the power to determine when the government is to mint funds, the Commerce Secretary must action the minting of funds upon request, while establishing that the motion has gained a supermajority.​

7 - Financial Independence and Accountability
(1) The Federal Reserve shall operate with financial independence to carry out its functions without political interference.
(2) The Board of Governors shall submit a monthly report to Congress detailing the organization's activities, policies, and financial performance.
(3) Through clear and accessible communication, the Federal Reserve shall convey its goals, actions, and rationales to the public, ensuring that its decisions are guided by the broader interests of the citizenry.
(4) Inspector General: The Chairman of the Joint Congressional Economics Committee shall have unfiltered access to view all Federal Reserve Communications. The Inspector General may not communicate in any of these channels unless authorized by the Reserve Governor.
(5) The Inspector General is responsible for holding the Board of Governors accountable, addressing issues to Congress, and ensuring that the Federal Reserve operates in the best interests of the Commonwealth.

(a) Future Clause: Should two separate chamber-specific Congressional Economic Committees exist, the Chair of the Senate Economic Committee will be the Inspector General.​

(6) Congress may overturn a decision of the Board with a 2/3 majority in both chambers and may remove Board members with a majority in both chambers

8 - Implementation and Transition
(1) The establishment of the Federal Reserve shall be carried out within five days following the signing of this Act.
(2) During the transition period, existing monetary authorities shall work collaboratively to ensure a smooth transfer of responsibilities to the Federal Reserve

 

[Milkcrack]

House: 5-4-2
Senate: 5-0-0

The following amendment has been approved by Congress before signage and the bill has been amended accordingly.

From:
(6) Congress will be responsible for identifying acts of criminality and removing board members via motion

To:
(6) Congress may overturn a decision of the Board with a 2/3 majority in both chambers and may remove Board members with a majority in both chambers

 

[xLayzur]

Presidential Assent

This bill has been granted assent and is hereby signed into law.