Board of Governors Federal Reserve Bank Member Banks Federal Open Market Committee (FOMO) Advisory Councils

The Federal reserve system  Created in 1913 Board of Governors  Appointed by the President for one 14-yr term  Must be approved by the Senate  One members term expires every 2 years  Chairman  Ben Bernanke

The Role of banks  Banks are a business with the same profit making goals of any other business.  They make a profit by providing services

Role of banks 1. They provide safety and interest income for depositors 2. A source of loans for people in business 3. How does a bank make a profit? a. By charging higher rates of interest to borrowers then they pay to depositors b. Credit cards

Bank assets and liabilities  An asset is something you own a. Loans b. Bonds c. Real estate d. Cash reserves

 Liabilities are something you owe. a. Checking and saving account deposits b. Loans from the Federal Reserve c. Money owed to stockholders

Federal Deposit Insurance Corp. 1. Stop runs on banks 2. $250,000

Competition for banks 1. Tax shelters, 401K plans, Roth IRA’s 2. The Stock Market 3. Credit Unions

Modern banking

Fractional reserve banking

Common loans banks make Mortgage  Real estate  Lender & borrower  Monthly  Lender

Credit cards  Issued by banks to users  Pays; lends  Repaying

Banking deregulation Bank Mergers  Larger banks acquired smaller ones  Smaller ones joined forces to enter different geographic markets

BENEFITS  Increased competition which keeps interest rates low  Increase in the number of bank branches

CONS  Fewer banks to choose from  Big banks show less interest in smaller customers

Banking Services Financial Services Act of 1999  Allowed banks to sell stocks, bonds, and insurance

Technology & Banking  ATM’s – allow customers to bank without seeing a bank officer  Debit Cards – Can be used to withdraw cash to make a purchase  Stored – value cards – Represent money that the holder has a deposit with the issuer (gift cards)