Final answer:
The Federal Reserve System is known as a quasi-governmental agency because it is a centralized bank that is privately owned by member banks yet publicly controlled, with policy decisions insulated from political pressure and not requiring congressional approval.
Step-by-step explanation:
The Federal Reserve System is sometimes referred to as a quasi-governmental agency because of its unique structure and functions within the financial system of the United States. It is a semi-decentralized institution which blends the characteristics of a private organization with that of a public agency. The Federal Reserve is owned by private member banks, but it is publicly controlled through the involvement of government appointees. It is run by a Board of Governors, consisting of seven members appointed by the President and confirmed by the Senate. These appointments are for long, staggered terms to protect the board from political pressures and ensure decisions are made based on economic merits. Additionally, the Fed's policy decisions do not require congressional approval, and the President cannot demand a Federal Reserve Governor to resign, further separating it from direct political influence.
The Fed was established as the nation's central bank in 1913 to serve as the bank of banks, regulate the banking industry, and control the money supply. It also enforces consumer protection laws, maintains the payment system, and provides services to the federal government. Its responsibilities include regulating financial institutions, conducting monetary policy, supervising member banks, and overseeing truth-in-lending laws among others. The Federal Reserve operates with the goal of strengthening and stabilizing the nation's monetary system, and the Federal Open Market Committee (FOMC) makes decisions regarding the growth of the money supply. While the Fed works closely with legislative and executive branches of the government, it maintains a level of independence to preserve its objectives.