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In 1913 the Federal Reserve Act established the Federal Reserve central bank. ...
The Federal Reserve is structured to work independently within the Federal Government. ... To make sure this didn’t happen again the Fed was given power to require that banks hold required and excess reserves (Federal Reserve). The required reserves are there in case of an emergency when people need their money (Federal Reserve), while excess reserves are used to make loans.
The Federal Reserve’s structure consists of twelve Federal Reserve districts in which each district has one main bank (Miskin and Eakins 151). These twelve banks clear checks, issue new currency and withdraw damaged currency from circulation (Federal Reserve). All national banks are required to be members of the Federal Reserve System (Miskin and Eakins 154). At the head of the Fed are the governors who are appointed by the president and confirmed by the senate (Federal Reserve). ... The chairman is the leader of the Board of Governors and is appointed every four years (Federal Reserve).
The Governors are from different Federal Reserve Districts (Federal Reserve), yet all are members of the Federal Open Market committee or FOMC (Miskin and Eakins 155). The twelve bank presidents get to attend the meetings, however five of the banks get to vote while the others switch off (Federal Reserve). The chairman has considerable power as he advises the President and congress on economic policies and is the speaker to the press on Economic issues (Federal Reserve). In addition to monetary policies the Fed has regulatory and supervisory responsibilities over banks that are members of the system (Federal Reserve). The board sets margin requirements which limit the credit for purchasing or carrying securities and implement major federal laws governing consumer credit (Federal Reserve), such as the Truth in Lending Act, and the Equal Credit Opportunity Act. By law, the board of Governors must keep a record of the actions taken by the FOMC and include it to its annual report to congress (Federal Reserve). ... It consists of the seven members of the board of governors, five bank presidents and always included is the president of the Federal Bank of New York (Miskin and Eakins 158). ... The FOMC is the focal point for policy makers in the Federal Reserve System. The FOMC issues directives to the trading desk at the Federal Reserve Bank of New York. ...
During bad economic times or accelerated growth the Federal Reserve’s job is to stabilize the economy. The Fed has three policy mechanisms it can use to achieve its economic goals which include open market operations, the discount rate and reserve requirements (Miskin and Eakins 172). ... The effect of changing interest rates on the business sector is through the purchasing of new plant and equipment (Federal Reserve).
Approximate Word count = 2278
Approximate Pages = 9.1
(250 words per page double spaced)
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