Notebook # 22- Economics 15-1 The Federal Reserve System pages

The Federal Reserve System ESSENTIAL QUESTIONS: What is the purpose of the Federal Reserve System? What are the structures of the Federal Reserve System? What are the functions of the Federal Reserve System?

The Federal Reserve System GPS STANDARDS : SSEMA2- Describe the organization of the Federal Reserve System. a.) Describe the organization of the Federal Reserve System

l l The Federal Reserve System On December 23, 1913, Congress created the Federal Reserve System, or “Fed,” as the central bank of the United States. Today, the Fed provides financial services to the government, regulates financial institutions, maintains the payments system, enforces consumer protection laws, and conducts monetary policy. More simply, the Federal Reserve works to strengthen and stabilize the nation’s monetary system.

l l The Federal Reserve System Because everyone uses money, and because interest rates affect the overall level of economic activity, the Fed’s activities affect us all.

l l The previous Federal Reserve Chairman: Alan Greenspan Alan Greenspan was first appointed Federal Reserve Board Chairman by Republican President Ronald Regan in He was re-appointed by the Republican President George Bush and then again by the Democratic President Bill Clinton. The business community gives Greenspan high ratings and some argue that, aside from the president, Greenspan is the most powerful man in Washington, D.C.

l l Our present Federal Reserve Chairman: Ben Bernanke Ben Bernanke is a well known American economist and former member of the Board of Governors of the Federal Reserve System in the United States. He became Chairman of the U.S. Federal Reserve in Ben Bernanke was born on December 13, 1953 in Augusta, Georgia.

l l Our present Federal Reserve Chairman: Ben Bernanke President George W. Bush appointed Ben Bernanke as Chairman of the Federal Reserve on October 24, 2005 and he was sworn in on February 1, He succeeded Alan Greenspan as Chairman of the Reserve. The chairmanship for the Federal Reserve typically lasts 14 years.

l l The Federal Reserve System The Federal Reserve System is owned by its member banks. The 12 Federal Reserve district banks and 25 branch banks are located near the commercial banks they serve.

l l The Federal Reserve Board of Governors The Board of Governors establishes policies for the Federal Reserve and member banks to follow, regulates certain operations, and controls the money supply.

Structure of the Federal Reserve System

l l The Federal Reserve Board of Governors Seven members 1.Appointed by the president 2.Confirmed by the Senate 3.Serve staggered 14-year terms

Notebook # 23- Economics USA video The Federal Reserve 10 facts

l l The Federal Reserve Board of Governors Board of Governors work includes: 1.Analyzing economic developments 2.Supervising and regulating the operations of Federal Reserve Banks 3.Exercising responsibility in the nation’s payments system

l l The Federal Reserve Board of Governors Board of Governors work continued…. 4. Administering consumer credit protection laws 5. Authorizing changes in banks’ reserve requirements 6. Supervising Fed member banks and other financial entities 7. Authorizing changes in the Fed’s discount rate

l l The Federal Reserve Open Market Committee The Federal Open Market Committee (FOMC) makes decisions about the growth of the money supply.

l l Who advises the Fed on economic issues? 1.The Federal Advisory Council 2. The Consumer Advisory Council 3.Thrift Institutions Advisory Council

l Where is my Fed? 6F

l Where is my Fed? 6F Dennis P. Lockhart- President and Chief Executive Officer Federal Reserve Bank of Atlanta

l l Federal Reserve Banks 1. Operate a nationwide payments system which helps in the clearing of checks 2.Distribute the nation’s currency and coin 3.Supervise and regulate member banks 4.Serve as banker for the U.S. Treasury 5.Contribute to monetary policymaking through Bank presidents’ participation in the Federal Open Market Committee

l l The Federal Reserve System What is the main function of the Federal Reserve? How does the Fed perform this function? 1.The function of the Fed is to control the money supply. 2.The primary instrument the Fed uses to affect the money supply is the Federal Open Market Committee (FOMC): a.they make decisions about whether or not to raise or lower interest rates b.or whether or not to expand or contract the money supply

l l Other Functions of The Federal Reserve 1.The Fed monitors member banks’ reserves. 2.The Fed oversees foreign banks operating in the United States as well as the international operations of U.S. member banks operating in foreign countries 3.The Fed approves bank mergers like when Wells Fargo bought out Wachovia.

l l Functions of The Federal Reserve Why might the Fed disapprove of a merger between two large banks? Because it might limit competition between banks.

l l Other Functions of The Federal Reserve 5. The Federal Reserve is responsible for extending truth-in-lending disclosures to millions of individuals who purchase or borrow from corporations, retail stores, automobile dealers, and lending institutions. (they tell us the truth about using credit & credit cards) 6. The Federal Reserve is responsible for issuing paper currency. 7. The Federal Reserve is responsible for providing financial services to the federal government.

Structure of the Federal Reserve System p. 408 Clearing checks p. 412