Chapter 15 – The Federal Reserve System Section 1

Structure of the Federal Reserve Private Ownership: Privately owned by its member banks- commercial banks that own shares of Federal Reserve stocks

Board of Governors 7 members appointed by the President 14 year term ~ terms are staggered so there is always a vacancy every 2 years

District Banks Began as 12 independent and equally powerful banks Each region has its own president and board of governors ~ but are supervised by the Federal Reserve Board in D.C.

Open Market Committee Makes decisions about growth of the money supply & interest rates Advisory Committees 3 advisory committees that advise the Board of Directors One representative from each district Advise on overall economic health, credit laws, and savings banks

Responsibilities 1.Monitors reserves in state member banks 2.Monitors bank holding companies: companies that have stock but do not take deposits 3. International supervision 4. Mergers

Section 2

Monetary Policy: The expansion and contraction of the money supply in order to influence costs

Legal Reserves Consists of coins and currency that banks hold in their vaults A required percentage must be set aside for legal reserves

How Banks Operate Banks have Liabilities = debts and obligations to others A Balance sheet helps report the liabilities and assets to show their net worth = the excess of assets over liabilities (measure of value of a business)

Federal Spending After the budget activity and the video, which federal program would you alter if you had the opportunity? In your opinion, does this program deserve more or less federal funding? Why?