EPF 7 – Understanding How the Federal Reserve Bank Operates

EPF 7 – Understanding How the Federal Reserve Bank Operates What is the Fed?

EPF 7 – Understanding How the Federal Reserve Bank Operates What is the Fed? The Country’s Bank? The Central Bank? The Banker’s Bank?

EPF 7 - Understanding How the Federal Reserve Bank Operates “Essentially, “The Fed” is the nation’s central bank. The Federal Reserve System’s responsibilities include conducting monetary policy; supervising and regulating financial institutions; and providing services to depository institutions, the federal government, and to the public. . . . The goal of the Federal Reserve System is to help the economy achieve stable prices, full employment, and economic growth.”

EPF 7 - Understanding How the Federal Reserve Bank Operates Essentially, “The Fed” is the nation’s central bank. The Federal Reserve System’s responsibilities include conducting monetary policy; supervising and regulating financial institutions; and providing services to depository institutions, the federal government, and to the public. . . . The goal of the Federal Reserve System is to help the economy achieve stable prices, full employment, and economic growth.

EPF 7 - Understanding How the Federal Reserve Bank Operates Essentially, “The Fed” is the nation’s central bank. The Federal Reserve System’s responsibilities include conducting monetary policy; supervising and regulating financial institutions; and providing services to depository institutions, the federal government, and to the public. . . . The goal of the Federal Reserve System is to help the economy achieve stable prices, full employment, and economic growth.

EPF 7 - Understanding How the Federal Reserve Bank Operates Essentially, “The Fed” is the nation’s central bank. The Federal Reserve System’s responsibilities include conducting monetary policy; supervising and regulating financial institutions; and providing services to depository institutions, the federal government, and to the public. . . . The goal of the Federal Reserve System is to help the economy achieve stable prices, full employment, and economic growth.

EPF 7 - Understanding How the Federal Reserve Bank Operates Essentially, “The Fed” is the nation’s central bank. The Federal Reserve System’s responsibilities include conducting monetary policy; supervising and regulating financial institutions; and providing services to depository institutions, the federal government, and to the public. . . . The goal of the Federal Reserve System is to help the economy achieve stable prices, full employment, and economic growth.

EPF 7 - Understanding How the Federal Reserve Bank Operates Monetary Policy Use of Interest Rates & Money Supply Fiscal Policy Use of Tax Rates & Government Spending Depository Institutions Another Name for Banks, Credit Unions, etc. Reserve Requirements How Much of the Customer’s Money Banks Must Hold in Reserve What we already know

EPF 7 - Understanding How the Federal Reserve Bank Operates Brief History https://www.frbatlanta.org/about/fed-explained/2013/central-bank.aspx

EPF 7 - Understanding How the Federal Reserve Bank Operates Complete the EPF 7 Pretest in Google Classroom

OBJECTIVE: Be able to describe the organization OBJECTIVE: Be able to describe the organization of the Federal Reserve (FED) Banks Simplistically, . . . There are seven members appointed to the Board of Governors by the President and confirmed by the Senate Think of them as the board of directors

OBJECTIVE: Be able to describe the organization OBJECTIVE: Be able to describe the organization of the Federal Reserve (FED) Banks . One step down is the Federal Open Market Committee (FOMC) consisting of the 7 members of the B. of G. and 5 of the 12 Federal Reserve Bank Presidents (on a rotating basis) from around the country. This groups directs Monetary Policy for the FED

OBJECTIVE: Be able to describe the organization OBJECTIVE: Be able to describe the organization of the Federal Reserve (FED) Banks . The Open Market Committee in turn appoints from each of the FED districts the 12 members of the Federal Advisory Council that advises the B. of G.

OBJECTIVE: Be able to describe the organization OBJECTIVE: Be able to describe the organization of the Federal Reserve (FED) Banks . The FED is divided in to 12 separate banks and 25 branches around the country. Each bank, plus 9 additional offices, process all of our checks

OBJECTIVE: Be able to describe the organization OBJECTIVE: Be able to describe the organization of the Federal Reserve (FED) Banks . Approximately 20,000 nationwide banks & depository institutions are members. Each is regulated & FDIC Insured

OBJECTIVE: Be able to describe the organization OBJECTIVE: Be able to describe the organization of the Federal Reserve (FED) Banks

OBJECTIVE: Be able to describe the organization OBJECTIVE: Be able to describe the organization of the Federal Reserve (FED) Banks FED Bank of Atlanta’s Take: https://www.youtube.com/watch?v=L0hQfaxYU8k

(Of How the Fed Operates) OBJECTIVE: Be able to describe the organization of the Federal Reserve (FED) Banks AN OVERVIEW (Of How the Fed Operates) https://www.frbatlanta.org/about/fed-explained/2013/regional-banks.aspx

OBJECTIVE: Be able to describe the role OBJECTIVE: Be able to describe the role of the Federal Reserve (FED) Banks The Federal Reserve has three primary roles:  Monetary Policy: https://www.federalreserveeducation.org/about-the-fed/structure-and-functions/monetary-policy   Banking Supervision: https://www.federalreserveeducation.org/about-the-fed/structure-and-functions/banking-supervision Financial Services: https://www.federalreserveeducation.org/about-the-fed/structure-and-functions/financial-services

OBJECTIVE: Be able to describe the role OBJECTIVE: Be able to describe the role of the Federal Reserve (FED) Banks The Federal Reserve has three primary roles:  Monetary Policy: https://www.federalreserveeducation.org/about-the-fed/structure-and-functions/monetary-policy   Banking Supervision: https://www.federalreserveeducation.org/about-the-fed/structure-and-functions/banking-supervision Financial Services: https://www.federalreserveeducation.org/about-the-fed/structure-and-functions/financial-services See FED Exercise

OBJECTIVE: Be able to match the terms used in OBJECTIVE: Be able to match the terms used in the Federal Reserve Bank discussion with their appropriate definitions Government Securities Discount Rate Soundness Compliance Board of Governors Federal Open Market Committee Depository Institutions

OBJECTIVE: Be able to match the terms used in OBJECTIVE: Be able to match the terms used in the Federal Reserve Bank discussion with their appropriate definitions Government Securities Discount Rate Soundness Compliance Board of Governors Federal Open Market Committee Depository Institutions DEFINITION: A bond (an instrument of indebtedness) issued by the government with a promise of repayment in the future.

OBJECTIVE: Be able to match the terms used in OBJECTIVE: Be able to match the terms used in the Federal Reserve Bank discussion with their appropriate definitions Government Securities Discount Rate Soundness Compliance Board of Governors Federal Open Market Committee Depository Institutions DEFINITION: The interest rate charged to commercial banks and other depository institutions on loans they receive from their regional Federal Reserve Bank

OBJECTIVE: Be able to match the terms used in OBJECTIVE: Be able to match the terms used in the Federal Reserve Bank discussion with their appropriate definitions Government Securities Discount Rate Soundness Compliance Board of Governors Federal Open Market Committee Depository Institutions DEFINITION: What is said to describe a financial or depository institution (bank) as financially strong, secure, or reliable

OBJECTIVE: Be able to match the terms used in OBJECTIVE: Be able to match the terms used in the Federal Reserve Bank discussion with their appropriate definitions Government Securities Discount Rate Soundness Compliance Board of Governors Federal Open Market Committee Depository Institutions DEFINITION: The action or fact of complying with a wish or command.

OBJECTIVE: Be able to match the terms used in OBJECTIVE: Be able to match the terms used in the Federal Reserve Bank discussion with their appropriate definitions Government Securities Discount Rate Soundness Compliance Board of Governors Federal Open Market Committee Depository Institutions DEFINITION: The main governing body of the FED. It is charged with overseeing the FED and with helping implement monetary policy.

OBJECTIVE: Be able to match the terms used in OBJECTIVE: Be able to match the terms used in the Federal Reserve Bank discussion with their appropriate definitions Government Securities Discount Rate Soundness Compliance Board of Governors Federal Open Market Committee Depository Institutions DEFINITION: The branch of the Federal Reserve Board that determines the direction of monetary policy.

OBJECTIVE: Be able to match the terms used in OBJECTIVE: Be able to match the terms used in the Federal Reserve Bank discussion with their appropriate definitions Government Securities Discount Rate Soundness Compliance Board of Governors Federal Open Market Committee Depository Institutions DEFINITION: Another name for a bank, credit union, or similar commercial operation that holds consumer savings.

OBJECTIVE: Be able to describe Monetary Policy OBJECTIVE: Be able to describe Monetary Policy actions and their potential impact on the economy. MONETARY POLICY - The process by which a country controls the supply of money or interest rate to ensure price stability and general trust in the currency

MONETARY POLICY ACTIONS - Change the Discount Rate OBJECTIVE: Be able to describe Monetary Policy actions and their potential impact on the economy. MONETARY POLICY ACTIONS - Change the Discount Rate - Buy/Sell Government Securities - Change the Reserve Ratio

MONETARY POLICY ACTIONS - Change the Discount Rate OBJECTIVE: Be able to describe Monetary Policy actions and their potential impact on the economy. MONETARY POLICY ACTIONS - Change the Discount Rate - Buy/Sell Government Securities - Change the Reserve Ratio EXERCISE: For each of the actions listed, identify the action needed to EXPAND the economy when it appears the country is sliding into a recession or CONTRACT the economy when inflation is growing.

OBJECTIVE: Be able to describe Monetary Policy OBJECTIVE: Be able to describe Monetary Policy actions and their potential impact on the economy. See Handout “What to Do!?” If the economy is sliding into a recession, the FED had better . . . __________ the discount rate __________ the amount of government securities purchased __________ the reserve ratio EXERCISE: For each of the actions listed, identify the action needed to EXPAND the economy when it appears the country is sliding into a recession or CONTRACT the economy when inflation is growing.

OBJECTIVE: Be able to describe Monetary Policy OBJECTIVE: Be able to describe Monetary Policy actions and their potential impact on the economy. See Handout “What to Do!?” Likewise, if the inflation rate is rising higher than we would like to see, the FED had better . . . __________ the discount rate __________ the amount of government securities purchased __________ the reserve ratio EXERCISE: For each of the actions listed, identify the action needed to EXPAND the economy when it appears the country is sliding into a recession or CONTRACT the economy when inflation is growing.

- Supply currency & coin to banks - Process checks and e-payments OBJECTIVE: Be able to describe the services provided by the Federal Reserve Bank to its members. FED MEMBER SERVICES: - Supply currency & coin to banks - Process checks and e-payments - Protect consumers through regulation & education - Offer consumer insurance (FDIC)

- Protect consumers through regulation & education OBJECTIVE: Be able to describe the services provided by the Federal Reserve Bank to its members. FED MEMBER SERVICES: - Protect consumers through regulation & education - Offer consumer insurance (FDIC) Why?

- Protect consumers through regulation & education OBJECTIVE: Be able to describe the services provided by the Federal Reserve Bank to its members. FED MEMBER SERVICES: - Protect consumers through regulation & education - Offer consumer insurance (FDIC) Why? To maintain confidence in the United States Banking system.

OBJECTIVE: Be able to describe impact on the OBJECTIVE: Be able to describe impact on the national debt of Monetary Fiscal Policy. National Debt: The amount a country owes lenders from borrowing Budget Deficit: When a country’s spending is more than their revenue Balanced Budget: When a country’s spending is equal to their revenue Budget Surplus:

OBJECTIVE: Be able to describe impact on the OBJECTIVE: Be able to describe impact on the national debt of Monetary Fiscal Policy. National Debt: The amount a country owes lenders from borrowing Budget Deficit: When a country’s spending is more than their revenue Balanced Budget: When a country’s spending is equal to their revenue Budget Surplus: (Never heard of such a thing)

OBJECTIVE: Be able to describe impact on the OBJECTIVE: Be able to describe impact on the national debt of Monetary Fiscal Policy. National Debt: The amount a country owes lenders from borrowing Budget Deficit: When a country’s spending is more than their revenue Balanced Budget: When a country’s spending is equal to their revenue Budget Surplus: (Never heard of such a thing) Let’s see what Crash course Economics has to say about the National Debt https://www.youtube.com/watch?v=3sUCSGVYzI0

EPF 7 - Understanding How the Federal Reserve Bank Operates COMPLETE THE EPF 7 QUIZLET