The Federal Reserve System: Creating Stability in the US Economy
Chapter 16:
The Federal Reserve
& Monetary Policy
Section 1:
The Federal Reserve System
pgs.473-479
Creating the Fed
•
As you recall from Chapter 10, there
were times when the U.S. economy
suffered from panics and banking was
very unstable.
•
The government made many efforts
to address this problem, but had
limited success, t/f the Federal
Reserve Act was passed in 1913.
•
This created a
central bank
, which is a
nation’s main monetary authority,
which is able to conduct certain
monetary practices. (
monetary
means
“relating to money”)
•
The
Federal Reserve System
is the
central bank of the U.S. & is
commonly called the Fed. The Fed is
an independent organization within
the government, which has both
public & private characteristics.
Duties of a Central Bank
1.
Holding Reserves
—central
banks hold reserves to
influence the amount of
loanable funds banks have
available. This allows the
central bank to control the
money supply.
2.
Assuring Stability
—the central
bank also acts to assure stability
in the national bank and
monetary systems. Example: it
controls the way money is
issued and is circulated.
3.
Lending Money
—the central
bank lends money to banks &
the government. It does not
seek to make a profit through
lending.
The Duties of the Fed--1
•
The Fed supervises banking in
the U.S. by providing regulation
& oversight to make sure that
banks follow sound practices in
their operations.
•
The Fed also makes sure that
banks don’t defraud customers.
•
The Fed provides banking
services for both private banks
and national banks.
•
It accepts and holds deposits in
the form of cash reserves,
transfers funds between banks or
between banks and the
government, and makes loans to
these institutions. T/f it is called
the bankers’ bank.
The Duties of the Fed--2
•
The Fed is especially important
in times of emergency, like
during WWI & WWII the Fed
sold bonds.
•
The Fed also distributes
currency
, which is coins and
paper money, and regulates the
supply of money.
•
The supply of money does not
mean cash but all available
sources of money.
•
Specifically, the amount of
money that banks have
available to lend has important
effects on the whole economy.
(see will study this in section 2)
The Structure of the Fed
•
The Fed is different
from most countries’
central banks b/c it is
not a single national
bank but has both a
national and regional
structure.
•
This is b/c U.S. citizens
were hesitant to give
too much power to a
national bank.
Elements of the Fed--1
•
The
Board of Governors
is a board of seven
appointed members who
supervise the operations
of the Fed and set policy.
They serve for a single 14-
year term, with the
approval of the senate.
•
The president chooses
the chairman and vice-
chairman, who serve
four-year terms.
Janet Yellen
Elements of the Fed--2
•
Twelve District Banks
—The
Federal Reserve System is
organized into 12 district
banks.
•
On this map you see the
cities where the Federal
Reserve district banks and
the offices of the Board of
Governors are located.
•
While the district banks are
responsible for carrying out
the national policy set forth
by the Board of Governors,
each one also serves the
needs of its particular
region.
Elements of the Fed--3
•
Member Banks
—All nationally
chartered banks automatically
are members of the Federal
Reserve System.
•
State-chartered banks, if they
wish, may apply to join the
Fed.
•
There are around 2,000
national bank members and
900 state bank members,
about 37% of all commercial
banks.
•
Each member bank must buy
stock in its Federal Reserve
district bank.
•
Member banks earn a set
dividend rate on the stock
they hold.
Elements of the Fed--4
•
The
Federal Open Market
Committee (FOMC)
is a board of
the Fed that supervises the sale
and purchase of federal
government securities.
•
The FOMC consists of 12 voting
members, including the Board of
Governors, the president who
take turns serving one-year
terms.
•
The sale & purchases of federal
government bonds on the open
market are the principal tools
used by the Fed to promote a
stable, growing economy.
•
At the end of each meeting the
FOMC issues a public statement
to explain its assessment of the
economy and its latest actions.
Elements of the Fed-5
•
Advisory Councils
—Three
committees provide advice directly to
the Board of Governors.
1.
The 12 members of the
Federal
Advisory Council
, represent the
commercial banking industry.
2.
The
Consumer Advisory Council
advises the board on matters
concerning the Fed’s
responsibilities in enforcing
consumer protection laws related
to borrowing.
3.
The
Thrift Institutions Advisory
Council
was created in 1980. Thrift
institutions are savings and loan
institutions, savings banks or other
institutions that serve savers. The
Fed doesn’t regulate these
institutions, these institutions still
must conform to the Fed’s
requirements & may borrow from
the Fed.
In 1913, the Federal Reserve Act established the central bank, known as the Fed, to address economic instability. Explore the duties and structure of the Fed, including its role in regulating banks, controlling the money supply, and providing stability during emergencies.
Download Presentation
Please find below an Image/Link to download the presentation.
The content on the website is provided AS IS for your information and personal use only. It may not be sold, licensed, or shared on other websites without obtaining consent from the author. Download presentation by click this link. If you encounter any issues during the download, it is possible that the publisher has removed the file from their server.
E N D
Presentation Transcript
Chapter 16: The Federal Reserve & Monetary Policy Section 1: The Federal Reserve System pgs.473-479
Creating the Fed As you recall from Chapter 10, there were times when the U.S. economy suffered from panics and banking was very unstable. The government made many efforts to address this problem, but had limited success, t/f the Federal Reserve Act was passed in 1913. This created a central bank, which is a nation s main monetary authority, which is able to conduct certain monetary practices. (monetary means relating to money ) The Federal Reserve System is the central bank of the U.S. & is commonly called the Fed. The Fed is an independent organization within the government, which has both public & private characteristics. https://www.soundmoneydefense.org/img/federal-reserve-building-audit.jpg
Duties of a Central Bank http://truedemocracyparty.net/wp-content/uploads/US-FederalReserveSystem-Seal_svg_.png 1. Holding Reserves central banks hold reserves to influence the amount of loanable funds banks have available. This allows the central bank to control the money supply. Assuring Stability the central bank also acts to assure stability in the national bank and monetary systems. Example: it controls the way money is issued and is circulated. Lending Money the central bank lends money to banks & the government. It does not seek to make a profit through lending. 2. 3.
The Duties of the Fed--1 The Fed supervises banking in the U.S. by providing regulation & oversight to make sure that banks follow sound practices in their operations. The Fed also makes sure that banks don t defraud customers. The Fed provides banking services for both private banks and national banks. It accepts and holds deposits in the form of cash reserves, transfers funds between banks or between banks and the government, and makes loans to these institutions. T/f it is called the bankers bank. https://www.freedomsphoenix.com/Uploads/Graphics/173-0625223236-the-fed.jpg
The Duties of the Fed--2 http://news.coinupdate.com/wp-content/uploads/2015/03/us-coins.jpg The Fed is especially important in times of emergency, like during WWI & WWII the Fed sold bonds. The Fed also distributes currency, which is coins and paper money, and regulates the supply of money. The supply of money does not mean cash but all available sources of money. Specifically, the amount of money that banks have available to lend has important effects on the whole economy. (see will study this in section 2) http://www.johnbicycles.com/uploads/2/3/7/9/23799669/6718383_orig.jpg
The Structure of the Fed http://40.media.tumblr.com/6f18b0bc0b9eeaa7ddf44532523053d0/tumblr_inline_nlyiadbjeo1r57lmx_500.png The Fed is different from most countries central banks b/c it is not a single national bank but has both a national and regional structure. This is b/c U.S. citizens were hesitant to give too much power to a national bank.
Elements of the Fed--1 http://www.getagoldira.com/wp-content/uploads/2015/12/janet_yellen_federalreserve_mgn.jpg The Board of Governors is a board of seven appointed members who supervise the operations of the Fed and set policy. They serve for a single 14- year term, with the approval of the senate. The president chooses the chairman and vice- chairman, who serve four-year terms. Janet Yellen
Elements of the Fed--2 http://www.ken-szulczyk.com/economics/macro/fedmap.gif Twelve District Banks The Federal Reserve System is organized into 12 district banks. On this map you see the cities where the Federal Reserve district banks and the offices of the Board of Governors are located. While the district banks are responsible for carrying out the national policy set forth by the Board of Governors, each one also serves the needs of its particular region.
Elements of the Fed--3 Member Banks All nationally chartered banks automatically are members of the Federal Reserve System. State-chartered banks, if they wish, may apply to join the Fed. There are around 2,000 national bank members and 900 state bank members, about 37% of all commercial banks. Each member bank must buy stock in its Federal Reserve district bank. Member banks earn a set dividend rate on the stock they hold. http://home.earthlink.net/~cadman777/komh-fedpyramid.gif
Elements of the Fed--4 http://www.sott.net/image/s13/267790/full/Federal_Open_Market_Committee.jpg The Federal Open Market Committee (FOMC) is a board of the Fed that supervises the sale and purchase of federal government securities. The FOMC consists of 12 voting members, including the Board of Governors, the president who take turns serving one-year terms. The sale & purchases of federal government bonds on the open market are the principal tools used by the Fed to promote a stable, growing economy. At the end of each meeting the FOMC issues a public statement to explain its assessment of the economy and its latest actions.
Elements of the Fed-5 Advisory Councils Three committees provide advice directly to the Board of Governors. The 12 members of the Federal Advisory Council, represent the commercial banking industry. The Consumer Advisory Council advises the board on matters concerning the Fed s responsibilities in enforcing consumer protection laws related to borrowing. The Thrift Institutions Advisory Council was created in 1980. Thrift institutions are savings and loan institutions, savings banks or other institutions that serve savers. The Fed doesn t regulate these institutions, these institutions still must conform to the Fed s requirements & may borrow from the Fed. http://www.mindserpent.com/American_History/federal/fed_res/publications/richmond/images/fedsystem.jpg 1. 2. 3.
