All nationally chartered banks must be members of the Fed. The state chartered banks can choose to be members. The Federal Reserve System's main responsibility is to safeguard the proper functioning of our money system. It is the watchdog of our money supply, our interest rates, and the economy's price level. Obviously, if it's going to do that job at all, it has to monitor the activities of the nation's financial institutions, anticipate what they will do, prevent them from doing some things, encourage them to do others, and do all this without interfering too much in the conduct of private business.
Some people think so.
But these same people are unable to imagine a modern economy operating without a central bank. The Fed's organizational structure is not very complicated. D.C. The Board consists of seven members, appointed by the President and confirmed by the Senate. Each serves a 14 year term. Appointments are staggered, one every other year, so that no President or Senate session can manipulate the composition of the board.