A common question among investors is why the Federal Reserve divided the country into 12 districts instead of 50, aligning with the states.
The answer is simple: the Fed wanted to make clear that it is different from the White House, separate from politics, and independent of the government administration, which is structured around 50 states. The 12 districts were designed based on banking ties and financial linkages across the United States, not political boundaries.
The United States is composed of 50 independent states, and in general or midterm elections, political efforts are naturally focused on winning support across these states. In contrast, the Federal Reserve’s focus is entirely different. It seeks to emphasize that its mandate is purely monetary: to manage inflation toward its 2% target and to keep unemployment low.
This independence ensures the Fed operates without influence from the White House or the president. The US dollar has maintained its global dominance partly because the Fed pursues policies free from political agendas. It is not a tool for any president to achieve political goals. For this reason, the Federal Reserve is often nicknamed “the central bank of all central banks.” While other central banks do not deposit money directly with the Fed, their monetary policies closely track its moves because of the Fed’s independence and unmatched credibility.