1. The Governments Bank and the Bank for the Banks…
The Federal Reserve (1913)
The Governments Bank and the Bank for the Banks…

2. Structure of the Federal Reserve
The Federal Reserve – (President / BOG)
(FOMC / FAC)
12 Federal Reserve District Banks
Branch (District) Banks – Omaha
Individual Banks – Your Bank…

3. Board of Governors (BOG)
7 members
appointed by the President, with the consent of the Senate
serve 14 year, non-renewable terms, staggered
sets policy instruments other than open market operations
decides permissible activities of banks and holding companies

4. The Fed Chairman “Chief or President”
Important Chairs of the BOG (Federal Reserve) (4 Year Terms)
Paul Volcker
Alan Greenspan
Ben Bernanke –
Janet Yellen – 2014-

5. The Federal Open Market Committee (FOMC)
12 voting members -- 7 Board of Governors + 5 District Bank Presidents (19 members in all)
meet 8 times per year (more, if needed)
design monetary policy, by specifying Federal Funds rate
(FAC) Federal Advisory Committee

6. Federal Reserve District Banks
each bank exists within 12 districts within the US
holds deposits of Federal Government
collects economic data and does economic research
Insure the banks (FDIC)
performs check clearing services

7. Federal Reserve District Banks

8. District Banks -- Administer Monetary Policy
conduct Discount Loans with banks within district
enforce reserve requirements for banks within district
hold reserves of banks within district
New York bank most important, open market operations done there

9. Federal Reserve Branch Banks and Member Banks
Branch (District) Banks -- serve as decentralized regulators, primarily for larger Fed districts in geographic size – More to the West – Omaha is the closest for us.
Private Banks – your bank!

10. How Independent is The Federal Reserve?
Structure implies considerable independence.
Federal Reserve is financially independent of the Federal Government’s budget.

11. The President and the Federal Reserve
-- President appoints members of
the BOG
-- BOG typically serve less than 14
year terms
-- part of the legislative process,
can introduce legislation

12. The Biggest Argument For Continued Independence
Current Federal Reserve can make the tough policy decisions.
The track record of the US Federal Reserve: the Volcker and Greenspan years.

13. Expansionary and Contractionary Policy
Expand $ - Recession / Unemployment
Contract $ - Inflation / Growth

14. The Fed’s Tools Open Market Operations The Discount Rate
Reserve Requirement
Interest Rate Bias