President Bush on Monday nominated Ben Bernanke to be chairman of the board of governors of the Federal Reserve System. Here's a look at the system he would lead.

What is the Federal Reserve System?

Sometimes called "the Fed," it is the nation's central bank, composed of a seven-member Federal Reserve board in Washington plus 12 regional Federal Reserve Banks.

What does a central bank do?

Its primary responsibility is to control the availability of money and the cost of money — interest rates. When the economy is growing sluggishly, the Fed provides more money to the banking system. That pushes down interest rates and spurs greater borrowing and more economic growth. When the economy is growing too quickly and inflation is rising, it withdraws money from the banking system. That pushes interest rates higher and slows economic growth, helping to keep a lid on inflation.

How does it affect my life?

Fed policy helps determine the interest rates people pay on their home mortgages and for other borrowing. It also influences the number of jobs the economy creates and inflation — how fast prices for goods and services increase.

How is this done?

The Federal Reserve buys and sells U.S. Treasury and federal agency securities, loans money to member institutions, and determines how much banks must hold in reserve.

What role does the chairman have?

The Fed chairman is the face of the Federal Reserve, serving as its spokesman and testifying before Congress. The chairman also manages the staff of the Federal Reserve Board and presides at board meetings.

Why has the Fed been in the news so much lately?

It has increased the targeted federal-funds rate — the interest rate banks charge each other — 11 times since June 2004 in an attempt to raise mortgage rates and slow down a housing market thought to be growing too fast.

Who owns the Federal Reserve and how is it funded?

The Federal Reserve is a private, independent system, created by Congress, which does not make a profit. Its income is generated from interest on U.S. securities, interest on loans to banks and bank holding companies and service fees it charges the institutions.

Who runs the Federal Reserve?

The seven members of the board of governors are nominated by the president and confirmed by the Senate. They serve 14-year terms and cannot be reappointed. The president nominates the chairman and vice chairman from among the board and the Senate confirms them. They serve four-year terms but can be reappointed until their terms as governors expire.

Technically, the chairman has only one vote on the Federal Open Market Committee (FOMC). This panel, which sets interest rates, is composed of the seven Fed board members in Washington and the 12 presidents of the Fed regional banks. Only five of those regional bank presidents are voting members of the FOMC at any one time.

So if the Fed chairman is only one vote out of 12, how does that give him any influence?

The Fed does not work like the Supreme Court, where 5-4 votes are common. The financial markets, which closely monitor Fed actions, would be unnerved with such a close vote on the FOMC. Federal Reserve Chairman Alan Greenspan was a master consensus builder during his 18-plus years on the Fed. He rarely had even a single dissenting vote.

How much are they paid?

For 2005, the chairman will earn $180,100. Other board members will earn $162,100.