Bell Ringer1. What type of financial institution offers full

financial services and forms the largest part of the financial system?

2. What type of financial institutions is often formed by people who work in the same industry?

• Hint- there are 3 types of financial institutions to choose from

Money and BankingThe Federal Reserve System

Chapter 21Section 2

The Federal Reserve SystemStructure and Organization

Central Bank of the United States is the Federal Reserve System. - AKA the “FED” - Banker’s bank - 12 Federal Reserve Districts

Board of Governors

- 7 members - President appointed/senate ratified - President selects one to chair for a four year term.

The Federal Reserve SystemAdvisory Council

The Fed has several advisory council.

Federal Open Market Committee (FOMC)- A major policy-making group which makes decisions that affect the economy as a whole by manipulating, or controlling the money supply.

Functions of the FED

The Fed as Regulator

Oversees and regulates large commercial banks

The Federal Reserve System Functions of the FED Continued

Acting as the Government’s Bank - Holds the government’s money - Sells U.S. government bonds and Treasury Bills - Manages the nation’s currency.

How Monetary Policy Works

Monetary Policy- The controlling the supply of money and cost of borrowing the money- credit- according to the needs of the economy.

The Federal Reserve SystemHow Monetary Policy Works

Continued

Changing the Supply of Money

Monetary Policy Tools

Discount Rate- The rate the fed charges member banks for loans.

Reserve- Requirement for member banks must keep a certain percentage of their money in a Federal Reserve Banks as reserve against their deposits

Open Market Operations-The purchase or sale of U.S. government bonds and Treasury bills

Federal Reserve System

• Regulate financial System– Rules written that other banks must follow

• Maintain Currency– Coins printed and distributed

• Government Bank– Tax $ goes here and Social Security comes from

here

Exit Slip• Identify and evaluate benefits

and disadvantages from eliminating all coin money.