What Systems Control the Money in the Government?

• The federal government has a great deal of control over the financial system in the United States. america map image by Vladislav Gajic from Fotolia.com

  One of the most contentious areas of government intervention and control in American life is the control the government has over the money supply. Four institutions that have great effect on the fiscal and economic policies of the federal government are Congress, the Treasury, the executive branch and the Federal Reserve System.

Congress

• Congress passes bills authorizing the federal government to spend taxpayer money. Capitol Building image by dwight9592 from Fotolia.com

  While many people tend to place blame strictly on the president for spending too much money (or not enough, depending on their point of view), the president's role in federal government spending is actually fairly limited. The president presents a budget to Congress, asks for money to be appropriated for a program, and approves or rejects a final spending plan issued by Congress, but Congress controls the purse strings in the federal government. Under Article I, Section 7 of the U.S. Constitution, "All bills for raising Revenue shall originate in the House of Representatives; but the Senate may propose or concur with Amendments as on other Bills." If the president rejects an appropriations bill issued by Congress by vetoing it, Congress can override the veto with a two-thirds approval for the override by the House and the Senate.

Treasury Department

• United States Treasury building Department of Treasury Building image by dwight9592 from Fotolia.com

  According the the website of the U.S. Department of the Treasury, the Treasury's mission is to "Maintain a strong economy and create economic and job opportunities by promoting the conditions that enable economic growth and stability at home and abroad, strengthen national security by combating threats and protecting the integrity of the financial system, and manage the U.S. Government's finances and resources effectively." Some of the responsibilities of the Treasury include collecting money owed to and paying all debts accrued by the United States government, printing paper money and minting coins, supervising national banks, advising the president and Congress on economic and financial issues and enforcing federal laws regarding taxation and finances. In addition to protecting the president, the Treasury's Secret Service agency is also responsible for combating counterfeiters.

Executive Branch

• The president is the head of the executive branch. The White House image by dwight9592 from Fotolia.com

  As head of the executive branch of the federal government the president has indirect influence over controlling economic and financial issues through departments like Treasury and Commerce and the agencies contained inside these departments, such as the Securities and Exchange Commission.

Federal Reserve System

• Paper money in the United States is actually called Federal Reserve notes. two dollar bills image by leemarusa from Fotolia.com

  An entity very active in controlling money in the United States is the Federal Reserve System. The Federal Reserve (or "the Fed") consists of 12 regional banks located throughout the United States that conduct business with the Treasury and the other Fed banks. The 12 regional banks and their directors are overseen by a seven-member board of governors headed by the chairman of the Federal Reserve. The Fed controls the amount of money in circulation by determining how much money that commercial banks must maintain in reserve (the reserve ratio) and sets the "discount rate," which is the interest rate that banks pay when borrowing from each other or from Federal Reserve banks. The Fed also buys and sells U.S. government bonds and Treasury bills, which the government uses to finance its operations.