CHAPTER 7

inside The Federal Reserve

■ Now, More than Ever Before, You Should Know

the Players

The Federal Reserve is the central bank of America.
Why don’t they call it the Central Bank of America? Because
they know Americans hate central banks. We’ve rejected two
central banks in the past in the 18th and 19th centuries. So,
they gave it the funny name “Federal Reserve”. That way people
wouldn’t understand what it is.
Today, investors use the name “Fed” as shorthand for the U.S.
Federal Reserve System. Shorthand is convenient, but sometimes
it hides as much as it reveals. A one-size-fits-all description for
an institution is easy, but highly misleading. In fact, the Federal
Reserve is a complicated, multifaceted structure with diverse
parts and personalities that few investors follow.
Usually, this doesn’t matter, because the Fed speaks with one
voice and is of one mind. Most people are familiar with Janet
Yellen in her role as chairwoman of the Federal Reserve, and
know that Ben Bernanke and Alan Greenspan were her prede-
cessors. Familiarity with the views of the chairwoman is enough
most of the time. But this is not one of those times.
Today, it is critical for you to know the players while Fed-
watching. Understanding Fed structure and the predilections of
the players is the key to understanding interest rate policy over