MindMap Gallery Federal Reserve

Federal Reserve

The Federal Reserve System is the central banking system of the United States of America.

Edited at 2020-10-10 07:04:43

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Federal Reserve

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Federal Reserve

Federal Reserve Act

Federal Reserve Banks

12 Federal Reserve Districts (Banks)

Location

Urban areas

Rural areas

Manufacturing interest

Agriculture interest

Business interest

Board of Directors

Class A = 3 Bankers

Class B = 3 Leaders in Industry, Commerce, & Ag.

Elected by member banks

Class C = Publict Interest Directors

Appointed by Board of Governors

Roles

Manage check clearing in payments system

Manage currency in circulation

Conduct discount lending

Perform supervisory/regulatory functions

Provide services to businesses & general public

Serve on FOMC

Duties related to Fed's roles in payments system, control of money supply, & financial regulations

Make discount loans to member banks in its region

Provide liquidity to banks

Fulfill role as lender of last resort

End bank panics

Private commercial member banks

Depository Institutions Deregulation and Monetary Control Act

All banks keep reserve deposits w/Fed on same terms

Board of Governors

Definition

7 members

14-yr non renew. terms

1 Chairman

4-yr terms

Serve on Financial Stability Oversight Council

Serve as Chairman of FOMC

President's choice

Govern board of Fed Reserve System

Formal Responsibilities

Administer monetary policy to influence money supply & int. rates

Sets discount rate to charge on loans to banks

Influence setting of guidelines for open mkt ops

Set margin requirements

Determine permissible activities for bank holding companies

Approve bank mergers

Exercise admin. control over indiv. Fed Reserve banks

Review budgets

Set salaries of presidents & officers

Informal Responsibilities

Influence nat'l & internat'l econ. policy decisions

FOMC

Composition

12 members

Chairman

6 members from Board of Gov'rs

Pres. of Fed. Reserve Bank NY

Pres. of 4 other Fed Reserve Banks

Direct open mkt ops

Meet 8x/yr @ Washington DC

Before

Greenbook

Nat'l econ forecast for next 2 yrs

Bluebook

Projections for monetary aggregates & other info help alt. monetary policies

Prepared by Board staff

Beige Book

Summaries of econ. cond's in each dist.

Prepared by reserve banks

During

All members of Board of Gov'rs & all Dist. Bank pres. speak

After

Chairman summary

FOMC vote - set target for federal funds rate

Summarize views in public stmt

Roles

Setting target for federal funds rate

Dodd-Frank Wall Street Reform and Consumer Protection Act

Reform regulations of financial systems

Provisions

Member of Financial Stability Oversight Council

1 member Board Gov'rs = V. Chairman for supervision

GAO perform audit of emergency lending programs

Class A directors will not elect bank pres.

Disclose names of financial institutions it makes loans & buys/sells securities

Consumer Financial Protection Bureau

Operations

Independence

For

Technical

Politicians - ST

Higher likelihood for political biz cycle fluctuations

Against

Elected officials make pub. policy

Integrate monetary policy w/gov't taxing & spending

Fed hasn't always used indep. well

Profitable org.

Interest on securities

Interest on discount loans

Fees for check-clearing/other services

Income > Expenses to Treasury

Pres. can control members of Board of Gov'rs

Creation of Congress

Amend Fed's charter

Motivation

Public-Interest View

Officials act in best interest of public

Price stability

High employment

Economic growth

Principal-Agent View

Officials max. personal well-being

Increase power

Increase influence

Increase prestige

Political Business Cycle

Policymakers urge Fed lower int. rates

Central Bank

Outside US

Bank of England

Monetary Policy Committee

Bank of England Gov'r

4 external econ. experts nominated by chancellor

2 members appointed by gov'r

2 deputy gov'rs

Bank of Japan Law

Policy Board

Governor

2 deputy gov'rs

6 outside members

Bank of Canada

European Central Bank (ECB)

16 countries in European Monetary Union

ECB Exec. Board

6 members work exclusively for bank

VP & 4 others appointed by heads of state & gov't

8-yr non-renew. terms

Gov'rs of Member Nat'l Banks = terms of at least 5 yrs

Federal Reserve System

National Banks (forced)

State Banks (option)

Buy stock

Fixed Dividend = 6%

Private-Gov't joint venture