Federal Reserve
What is the Federal Reserve
$ Central Bank of the United States$ Created by Congress with the passage of the
Federal Reserve Act in 1913
$ Consists of:$ Board of Governors--central, governmental agency
$ Located in Washington, DC
$ Twelve regional Federal Reserve Banks$ Located in major US cities
$ Chartered to provide the nation with a safer, more flexible, and more stable monetary and financial system
Board of Governors
$ The seven members of the Board of Governors of the Federal Reserve System are nominated by the President of the United States and confirmed by the U.S. Senate. – One term begins every two years on February 1 of
even-numbered years
$ The Chairman and the Vice Chairman of the Board are chosen by the President from among the sitting Governors and are confirmed by the Senate. – They serve a term of four years and may be reappointed
Current Board Members
$ Ben S Bernanke, Chairman$ Janet Yellen, Vice Chair$ Kevin Warsh$ Elizabeth Duke$ Daniel Tarullo$ Sarah Bloom$ ? (Only show 6 on Website)
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Twelve Regional Banks
• Boston
• New York
• Philadelphia
• Cleveland
• Richmond
• Atlanta
• Chicago
• St. Louis
• Minneapolis
• Kansas City
• Dallas
• San Francisco
Connecticut, Maine, Massachusette, New Hamshire, Rhode Island, Vermont
Locations determined by the geographic distribution of the US population in 1913
Four General Duties
$ Conducting the nation’s monetary policy by influencing the money and credit conditions in the economy in pursuit of full employment and stable prices$ Raise and lower interest rates to promote
consumer spending, investing, and spending
Four General Duties
$ Supervising and regulating banking institutions to ensure the safety and soundness of the nation’s banking and financial system and to protect the credit rights of consumers
Four General Duties
$ Maintain the stability of the financial system and containing systemic risk that may arise in financial markets
Four General Duties
$ Providing certain financial services to the US Govt., to the public, to financial institutions, and to foreign official institutions, including playing a major role in operating the nation’s payment system
Set Monetary Policy$ The Federal Reserve conducts monetary policy using
three major tools: – (1) Open market operations - the buying and selling of U.S.
Treasury and federal agency securities in the open market
– (2) Discount rate - the interest rate charged depository institutions on loans from their Federal Reserve Bank's lending facility (the discount window)
– (3) Reserve requirements - requirements regarding the amount of funds that depository institutions must hold in reserve against deposits made by their customers.
Monetary Policy Tools
$ Using these tools, the Federal Reserve: $ Influences the demand for and supply of balances
that depository institutions hold on deposit at Federal Reserve Banks (the key component of reserves)
$ Influences the federal funds rate--the rate at which depository institutions trade balances at the Federal Reserve.
$ Changes in the federal funds rate trigger a chain of events that affect other short-term interest rates, foreign exchange rates, long-term interest rates, the amount of money and credit, and, ultimately, a range of economic variables, including employment, output, and prices of goods and services.
Boston Web Page
Http://www.federalreserve.gov
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