The Federal Reserve System

http://www.youtube.com/watch?v=GsxmwjQWiZs

List the 3 parts of the Federal Reserve

System• Board of Governors• Federal Open Market

Committee (FOMC)• Reserve Banks

Why was the Federal Reserve

System Created?• Address Banking Panics

When was the Federal Reserve System Created?

• 1913

The Board of Governors

How many people are on the Board Of

Governors?• 7 – Ben Bernanke - Chairman

How do the members of the

Board of Governors get their jobs?

• Appointed by the President and confirmed by the senate

For how long do the members of the

Board Of Governors serve?

• 14 years

What is the role of the Board Of Governors?• Help write policy to make

banks sound• Oversee Federal Reserve

Banks• Decisions about money growth

The Federal Open Market Committee

(FOMC)

What is the primary purpose of the

Federal Open Market Committee (FOMC)?• Direct monetary policy

Who is on the FOMC?

• 7 members of the Board of Governors• President of the Reserve Bank of

NY• 4 Reserve Bank Presidents

(rotating through)

What is the Federal Funds Rate?

• Bank rates of interest that banks charge each other for loans.

Federal Reserve Banks

How many districts are in the Federal Reserve System?

• 12

What are the three audiences of the Reserve Banks?

• Bankers• US Treasury• Public

What is the purpose of the Federal

Reserve Banks?• Coins• Store Currency• Supervise Banks• Bankers Bank

The Fed’s Regional Structure

What are the Fed’s three main

responsibilities?• Monetary Policy• Financial Services• Supervising Banks

How many Reserve Banks are there?

• 12

How many Branch Banks are there?

• 24

The federal Reserve Map!

Conducting Monetary Policy

What does it mean to “conduct

monetary policy”?• Managing the nations system of money and

credito Expansionary policy: increasing the supply of money

due to fear of recession!o Contractionary policy: decreasing the supply of money

due to inflationary fears!

List and explain the 3 tools that the Fed has to carry out its monetary policy.

• 1. Discount Rate – interest rate reserve banks charge for short term loanso Expansionary: interest rates loweredo Contractionary: interest rates raised

• 2. Reserve Requirements – percent of deposits that must be held at the member banks at all timesoExpansionary: reserve

requirement loweredoContractionary: reserve

requirement raised

• 3. Open Market Operations – buying and selling of bondsoExpansionary policy: US Treasury

bonds are bought back from public!oContractionary: US Treasury

bonds are sold to public!

Which of the three tools is the most

frequently used tool of the Fed?

• Open Market Operations

Supervising and Regulating Banks

What is the difference between

regulation and supervision of banks?• Regulation – written rules telling

banks what they can and can’t do• Supervision – enforcement of

policy (written rules)

List and explain the three duties of the

Fed that are associated with

supervising banks.1. Establish safe and sound banking

practices2. Protecting consumers3. Ensuring the stability of financial markets

Providing Financial Services

What kinds of financial services does the Federal Reserve System

provide for banks?• Distributes currency• Process checks• Electronic payments