The following is from the wikipedia artcile on the Federal Reserve. The whole article is very interesting to read:http://en.wikipedia.org/wiki/Federal_Reserve
The Federal Reserve System (also the Federal Reserve; informally The Fed) is the central banking system of the United States. Created in 1913 by the enactment of the Federal Reserve Act, it is a quasi-public (part private, part government) banking system composed of
(1) the presidentially-appointed Board of Governors of the Federal Reserve System in Washington, D.C.;
(2) the Federal Open Market Committee;
(3) 12 regional Federal Reserve Banks located in major cities throughout the nation acting as fiscal agents for the U.S. Treasury, each with its own nine-member board of directors;
(4) numerous private U.S. member banks, which subscribe to required amounts of non-transferable stock in their regional Federal Reserve Banks; and
(5) various advisory councils.
Currently, Ben Bernanke serves as the Chairman of the Board of Governors of the Federal Reserve System.Balance between private banks and responsibility of government
The system was designed out of a compromise between the competing philosophies of privatization and government regulation. While planning the design of the system, some people wanted the system to have generally private aspects whereas others wanted more government involvement. The system that resulted ended up being a compromise between these two philosophies. In the current system, private banks are for-profit businesses but there are restrictions on what they can do. These restrictions placed on private banks are government regulations. The Federal Reserve System is the part of government that regulates the private banks. The balance between privatization and government involvement is also seen in the structure of the system. Private banks elect members of the board of directors at their regional Federal Reserve Bank while the members of the Board of Governors are selected by the President of the United States and confirmed by the Senate. The private banks give input to the government officials about their economic situation and these government officials use this input in Federal Reserve policy decisions. In the end, private banking businesses are able to freely run a profitable business while the U.S. government, through the Federal Reserve System, oversees and regulates the activities of the private banks.