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Complexities of the Us Economy

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Complexities of the U.S. Financial System

Professor Crawford

Finance 100

10/28/2014

Complexities in the US Financial System

The Federal Reserve System is the most powerful component of the US Economy. The Federal Reserve is made up of four components. There is a seven member Board of Governors that direct monetary policy. A 12 member Federal Open Market Committee (FMOC) that sets the target for the federal funds rate which also guides the Federal Interest Rate. 12 regional banks that supervise commercial banks in their respective regions, these regional banks also implement monetary policy for the commercial banks to follow. The FED also has a designated Economist who provide information and reports to congress. The Federal Reserve’s primary function is to control inflation without triggering a recession. The FED’s work together with the Treasury Department to avoid or counter any global financial crisis. The FED has been diligent in the past 20 years and more effective in the past decade to assist in the rebound of the economy crashing in the mid 2000’s. “The financial crisis of 2008 led to the worst recession since the Great Depression of 1929. This was despite aggressive efforts by the Federal Reserve and Treasury Department to prevent the U.S. banking system from collapsing. As a result of the recession, housing prices fell 31.8% (What Was the 2008 Financial Crisis? Causes, Costs and Whether It Could Happen Again, by Kimberly Amendeo) more than during the depression.” The Federal Reserve Board of Governors primary function is to set monetary policy. Janet Yellen is the current appointed Chairman of the Board of Governors. The Chairman serves as public spokesperson and representative of the Board and manager of the Board's staff. The interest rate is guided by the federal funds rate. Interest rates are important to the US and

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