The Federal Reserve (1913)

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The Federal Reserve (1913)

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Title: The Federal Reserve (1913) Author: Suzanne & Don Dutkowski Last modified by: LPS LPS Created Date: 6/11/2001 4:21:01 PM Document presentation format – PowerPoint PPT presentation

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Title: The Federal Reserve (1913)


1
The Federal Reserve (1913)
  • The Governments Bank and the Bank for the Banks

2
Structure of the Federal
Reserve
  • The Federal Reserve (President / BOG)
  • (FOMC / FAC)
  • 12 Federal Reserve District Banks
  • Branch (District) Banks Omaha
  • Individual Banks Your Bank

3
Board of Governors (BOG)
  • 7 members
  • appointed by the President, with the consent of
    the Senate
  • serve 14 year, non-renewable terms, staggered
  • sets policy instruments other than open market
    operations
  • decides permissible activities of banks and
    holding companies

4
The Fed Chairman Chief or President
  • Important Chairs of the BOG (Federal Reserve) (4
    Year Terms)
  • Paul Volcker -- 1979-87
  • Alan Greenspan -- 1987-2006
  • Ben Bernanke 2006-2014
  • Janet Yellen 2014-

5
The Federal Open Market Committee (FOMC)
  • 12 voting members -- 7 Board of Governors 5
    District Bank Presidents (19 members in all)
  • meet 8 times per year (more, if needed)
  • design monetary policy, by specifying Federal
    Funds rate
  • (FAC) Federal Advisory Committee

6
Federal Reserve District Banks
  • each bank exists within 12 districts within the
    US
  • holds deposits of Federal Government
  • collects economic data and does economic research
  • Insure the banks (FDIC)
  • performs check clearing services

7
Federal Reserve District Banks
8
District Banks -- Administer Monetary Policy
  • conduct Discount Loans with banks within district
  • enforce reserve requirements for banks within
    district
  • hold reserves of banks within district
  • New York bank most important, open market
    operations done there

9
Federal Reserve Branch Banks and Member Banks
  • Branch (District) Banks -- serve as decentralized
    regulators, primarily for larger Fed districts in
    geographic size More to the West Omaha is the
    closest for us.
  • Private Banks your bank!

10
How Independent is The Federal Reserve?
  • Structure implies considerable independence.
  • Federal Reserve is financially independent of the
    Federal Governments budget.

11
  • The President and the
    Federal Reserve
  • -- President appoints members of
  • the BOG
  • -- BOG typically serve less than 14
  • year terms
  • -- part of the legislative process,
  • can introduce legislation

12
The Biggest Argument For Continued Independence
  • Current Federal Reserve can make the tough policy
    decisions.
  • The track record of the US Federal Reserve
    the Volcker and Greenspan years.

13
Expansionary and Contractionary Policy
  • Expand - Recession /
    Unemployment
  • Contract - Inflation / Growth

14
The Feds Tools
  • Open Market Operations
  • The Discount Rate
  • Reserve Requirement
  • Interest Rate Bias