The Federal Reserve Chairman is the head of the United States Federal Reserve, the nation’s central bank. The official title is Chairman of the Board of Governors of the Federal Reserve System, but Federal Reserve Chairman, Fed Chair, and Fed Chief are all used as shorthand titles. The Fed Chair is appointed by the President of the United States, and is confirmed by the United States Senate. The term of this position is four years, but in practice most Chairmen last for many terms, up to a maximum of 14 years, plus any extra years in the case of those filling another’s term.
The idea of a central bank goes back to the early days of the nation, with the First Bank of the United States established in 1791 after being suggested by Alexander Hamilton. In 1816, the Second Bank of the United States was established, to replace the then defunct First Bank. Many people in these early days opposed the idea of a central bank, and when President Andrew Jackson was up for re-election, he promised to not renew the bank’s charter, a promise he kept in 1836. Until 1862 there was no central bank in the United States, and until 1913 there were only intermittent central banks.
In the early part of the 20th century, there were a number of banking crises, culminating with the Panic of 1907. This panic in large part led to the creation in 1913 of the Federal Reserve Board as part of the Federal Reserve Act. The Federal Reserve Board had a Board of Directors, and this Board had a chairman. His role was somewhat different at the time, as the Board had substantially less power than the current Federal Reserve wields, and even less than the twelve regional Federal Reserve Banks.
The head of each of these Federal Reserve Banks was called a Governor, and they exercised considerable power over the national banking system. With the Banking Act of 1935, their title was changed to President, and their power was greatly reduced. At the same time, the board members of the Federal Reserve were retitled Governors, and the modern Federal Reserve Chairman was created as their leader. Marriner S. Eccles was the first Federal Reserve Chairman, and held the post until 1948, when his 14 year term limit was reached.
Between 1934 and 2009 there have been only eight Federal Reserve Chairmen, and each has wielded considerable power and greatly shaped the economic landscape of the United States. For many people, the most iconic Federal Reserve Chairman is Alan Greenspan, who served in this capacity from 1987 to 2006, under four presidents. He has received both great praise, notably for his handling of 1987’s Black Monday crash and the technology-based boom period of the 1990s, and criticism, notably for what some see as his overstepping the bounds of the Fed Chair.
Ultimately, the role of the Federal Reserve Chairman is to stop banking panics from occurring, and to keep the economy healthy. The Federal Reserve is able to retain elastic currency by expanding the money supply, to act as a lender of last resort if credit markets freeze up, to act as a central bank for other banks and for the government, and to handle federal funds for lending between banks. The Federal Reserve Chairman also helps to oversee the twelve Federal Reserve Banks, and is charged with preparing a report to the Speaker of the House outlining the Bank’s plan for the economy.