G. William Miller has been nominated by President Carter to head up one of the most powerful, most secretive and least understood federal agencies: the Federal Reserve Board.

The seven-member Board of Governors oversees the arcane, but important, monetary policy of the United States and does so in theoretical independence from the White House and Congress.

In recent years - as Congress has come to realize that how much money the central bank supplies to the economy has a major impact on economic growth, jobs and inflation - the independent policy making of the Fred has come under increasing congressional scrutiny.

Since 1975, the chairman has appeared before Congress every three months, alternating between the House and Senate Banking committees, to explain to legislators what goals and targets the Fred has set for the growth of the money supply (which is defined narrowly as checking accounts and currency in circulation).

So far, the board has successfully resisted further congressional interference in its monetary policy making - although the House once passed a bill that would have authorized the General Accounting Office to audit the operations of the central bank.

The Federal Reserve System was established in 1913. Its 12 regional federal reserve banks service commercial banks in their respective areas, but the locus of Federal Reserve decision making resides in the seven-member Board of Governors and the 12-member Federal Open Market Committee.

The Open Market Committee determines the U.S. monetary policy of the U.S. and directs the Fed's open market operations in which the agency buys and sells government securities in an attempt to control the growth of the money supply. The committee is composed of the seven governors, the president of the New York regional bank and four other regional bank presidents.

The Federal Reserve has been having serious troubles controlling money supply growth in recent years, as checking accounts and currency in circulation have grown more quickly than the central bank wanted (despite its repeated attempts to slow the growth).

Economists are divided on just how important the supply of money is to the economy, jobs and inflation. One school of thought holds that interest rates are more important than the supply of money and urges the Federal Reserve to direct its policies toward controlling interest rates.

Another school, called monetarism, believes that the supply of money is most important and urges the central bank to decide what level of money growth is compatible with other economic goals (such as economic growth and inflation) and to oncentrate on acheiving that growth rate.

Under its current chairman, Arthur F. Burns, the central bank has moved away from concentrating only on interest rates. Instead the agency is trying to keep money growth within a specified range while at the same time trying to avoid precipitous changes in short-term interest rates.

The Fred conducts its open market operations by buying and selling government securities. When it buys securities, it injects money into the banking system that commercial banks in turn relend. By selling securities it sops up money that banks might otherwise lend out.

The Fred also has other tools to affect money growth: the interest it charges banks that borrow from it, the so-called discount rate, and the percentage of deposits (reserves) it requires banks to keep in non-interest bearing accounts with the central bank.

But these two tools are less important than the open market operations. Banks borrow relatively little from the central bank and because banks find it expensive to keep non-interest bearing accounts with the Fed. the agency has been reluctant to raise reserve requirements. Banks have been dropping out of the Fed system making it increasingly difficult for the agency to control monetary policy.

Besides overseeing money growth, the central bank also regulates 1,030 state chartered banks that are members of the Federal Reserve System. The Comptroller of the Currency and the Federal Deposit Insurance Corporation regulate the other 13,300 banks.

Over the years the Fed has also acquired a host of other responsibilities including regulation of bank holding companies (corporations that have one or more banks as subsidiaries) serving as the fiscal agent for the Treasury and designing new electronic funds transfer systems.

Bank regulation has also come under serious Congressional scrutiny in recent years - after the nation was shocked to discover that many of its biggest and most important banks were on special problem lists kept by bank regulators.

There have been moves to consolidate all bank regulation into the same agency to eliminate the differences among the Fed, the comptroller, and the FDIC to prevent banks from playing one regulator against another.

The Fed and the others have resisted [TEXT OMITTED FROM SOURCE]