Pre-Civil War Banking in America I. Was a fiasco! II. 2 views of banking 1.Federalists a. ___________ banking system b. Led by ___________ 2._____________ a. __________ banking sytem b. Favored leaving power in the hands of ____. c. Led by ____________ centralized Hamilton Anti-Feds De-centralized The states Jefferson

Two Attempts At Central Banking 1.The _______________ (1791) a.Regulated state banks b.Held money collected by gov’t c.Issue bank notes backed by “specie” d.Borrowed and loaned money e.Died with Hamilton’s death 1 st National Bank

Chaos/Conflict/Calamity 2.____________ of the United States a. another 20 year charter( ) b. main opponent was __________ who vetoed its renewal in III.Let the Banking Party Begin! 1. “free banking era” 2. fraud/panics/different currencies 2nd National Bank Andrew Jackson

The Color of Money

Deep in the Heart of Texas

Confederate Currency

Colonial Currency

Birth of a FED 1.Bank Panic of Federal Reserve Act of 1913 a. Our Nation’s Central Bank

The Federal Reserve System I.Goals of the FED a. b. Elastic currency Monetary Policy

Federal Reserve System II.Structure of the FED A.Board of Governors i. ii. iii. iv.

Ben S. Bernanke was sworn-in on June 21, 2005 as Chairman of the President's Council of Economic Advisers. Prior to his appointment to the Council, Dr. Bernanke served as a member of the Board of Governors of the Federal Reserve System. Dr. Bernanke was born on December 13, 1953, in Augusta, Georgia. He received a B.A. in economics in 1975 from Harvard University (summa cum laude) and a Ph.D. in economics in 1979 from the Massachusetts Institute of Technology. Before becoming a member of the Board, Dr. Bernanke was the Howard Harrison and Gabrielle Snyder Beck Professor of Economics and Public Affairs and Chair of the Economics Department at Princeton University ( ). Dr. Bernanke had served as a Professor of Economics and Public Affairs at Princeton since 1985.

Dr. Bernanke has published many articles on a wide variety of economic issues, including monetary policy and macroeconomics, and he is the author of several scholarly books and two textbooks. He has held a Guggenheim Fellowship and a Sloan Fellowship, and he is a Fellow of the Econometric Society and of the American Academy of Arts and Sciences. Dr. Bernanke served as the Director of the Monetary Economics Program of the National Bureau of Economic Research (NBER) and as a member of the NBER's Business Cycle Dating Committee. Dr. Bernanke's work with civic and professional groups includes having served two terms as a member of the Montgomery Township (N.J.) Board of Education. Dr. Bernanke and his wife, Anna, have two children.

b.The Federal Open Market Committee i. ii.

c. The 12 Fed Banks

Fed Bank in Houston

III.Services of the FED (how they assist commercial banks and the government) a. b. c. d.

IV. Tools of the FED How does the FED manage the money supply?

Tool # 1 Reserve Requirement

Tool #2 The Discount Rate

Tool #3 Open Market Operations 1. If the FED buys bonds, bank reserves______, interest rates _____ and the money supply _______. increase fall increases

2. If the FED sells securities, bank reserves_________, interest rates ______ and the money supply ___________. decreaserise decreases

What does all this mean? 1.To fight a recession, the FED should _________ the money supply 2.In other words, expansionary monetary policy 3.And they can accomplish that by 1._____ reserve requirement 2._____ the discount rate 3._____ securities

To fight “too much money chasing too few goods” (inflation) the FED should ______the money supply. 1.Contractionary monetary policy 1. _________ reserve requirement 2. ___________ discount rate 3. _______ securities

Open Market Operations and the Fed Funds Rate