1. The Fed

2. Creation of The Fed 2 Reasons
Businesses and Consumers needed greater access to funds to encourage business expansion
Banks needed a source of emergency cash to prevent depositor panics that often led to bank runs

3. Federal Reserve Act of 1913 Created 12 Regional Banks 1935 Reforms
Didn’t work – each bank’s actions canceled out the actions of the other banks
1935 Reforms
More centralized power
The Federal Reserve System as we know it

5. Structure of The Fed Board of Governors Central Banks Member Banks
7 Governors – 14 year appointments
1 is appointed Chairman of the Fed – 4 year appointment
Central Banks
12 – each reserve bank has 9 directors (3/3 – commercial, member, public)
Member Banks

6. Political Independence
The BANKS “own” the Fed – the government does not own the Fed.
Independence from the gov’t  political independence

7. Functions of The Fed Serves Government Serves Banks
Banker and Agent
Issues Currency
Serves Banks
Clearinghouse
Supervises Lending Practices
Lender of Last Resort
Regulates Banking System RR
Audits
Regulates Money Supply
Monitors Demand