...A MUST READ on FED RESERVE by AYO-IGE.M A monetary control institution of a Nation is often refer to as the central bank or Nation bank. The Bank of England serve as the central bank of the England, Central bank of Nigeria serve as the monetary control of our great nation Nigeria while the Federal Reserve serve as the central bank of United States of America popularly known as the FED RESERVE . Supervision of money supply, adjustment of interest rate, printing and distribution of currency notes and coins which serve as the nation legal tender, lender of last resort, monitoring commercial banks and other financial institutions activities are monopoly power given to central banks. In most advance countries, central banks are design to operate independently in order to protect the institution from political interference, knavery and irascibility . A nation seeking for a prosperous economy growth must have in mind putting inflation under control, low interest rate is requisite and indispensable. A vibrant monetary policies and other policies related to each bureaucracy is the key to economy growth. The monetary institutions primarily control the amount of money in circulation in order to regulate inflation, failure to bring high interest rate under control tend to reduce consumer spending and this will lead to fall in aggregate demand, reduction in aggregate demand (AD) is the root cause of low economic growth and high unemployment In order to carry every loving citizen reading...
Words: 2158 - Pages: 9
...Federal Reserve David Shifflet ECO 561 December 2, 2013 Ted Nordin The Federal Reserve The Federal Reserve System, which some refer to as the Fed, will celebrate its 100th birthday just before Christmas this year. It was created by the Congress of the United States to provide the nation with a safer, more stable currency and economy. The Fed’s responsibilities have been further defined to include: * Conducting the nation's monetary policy by influencing money and credit conditions in the economy in pursuit of full employment and stable prices. * Supervising and regulating banks and other important financial institutions to ensure the safety and soundness of the nation's banking and financial system and to protect the credit rights of consumers. * Maintaining the stability of the financial system and containing systemic risk that may arise in financial markets. * Providing certain financial services to the U.S. government, U.S. financial institutions, and foreign official institutions, and playing a major role in operating and overseeing the nation's payments systems. (Board of Governors of the Federal Reserve System, 2013) The Fed uses several tools to accomplish these responsibilities including: * Open Market Operations – The purchase and sale of securities in the open market by a central bank – Used to adjust the supply of reserve balances so as to keep the federal funds rate--the interest rate at which depository institutions lend reserve balances...
Words: 1021 - Pages: 5
...Federal Reserve Banks operate under the general supervision of the Board of Governors in Washington. Each Bank has a nine-member Board of Directors that oversees its operations. Federal Reserve Banks generate their own income, primarily from interest earned on government securities that are acquired in the course of Federal Reserve monetary policy actions. A secondary source of income is derived from the provision of priced services to depository institutions, as required by the Monetary Control Act of 1980. Federal Reserve Banks are not, however, operated for a profit, and each year they return to the U.S. Treasury all earnings in excess of Federal Reserve operating and other expenses. 1. What are the factors that would influence the federal reserve in adjusting the discount rate? The Federal Reserve extends discount window credit to depository institutions under the primary, secondary, and seasonal credit programs. The rates charged on loans under each of these programs are established by each Reserve Bank’s board of directors every two weeks, subject to review and determination by the Board of Governors. The rates for each of the three lending programs are the same at all Reserve Banks, except occasionally for very brief periods following the Board’s action to adopt a requested rate change. The Federal Reserve also has the authority under the Federal Reserve Act to extend credit to entities that are not depository institutions in “unusual and exigent...
Words: 890 - Pages: 4
...Currency and Coin – Federal Reserve An important function of the Federal Reserve is ensuring that enough cash is in circulation to meet the public’s demand. An important function of the Federal Reserve is ensuring that enough cash—that is, currency and coin—is in circulation to meet the public’s demand. When Congress established the Federal Reserve, it recognized that the public’s demand for cash is variable. This demand increases or decreases seasonally and as the level of economic activity changes. For example, in the weeks leading up to a holiday season, depository institu¬tions increase their orders of currency and coin from Reserve Banks to meet their customers’ demand. Following the holiday season, depository institutions ship excess currency and coin back to the Reserve Banks, where it is credited to their accounts. Each of the twelve Reserve Banks is authorized by the Federal Reserve Act to issue currency, and the Department of Treasury is authorized to issue coin. The Federal Reserve Board places an annual printing order with the bureau and pays the bureau for the cost of printing. The Federal Reserve Board coordinates shipments of currency to the Reserve Banks around the coun¬try. The Reserve Banks, in turn, issue the notes to the public through depository institutions. Federal Reserve notes are obligations of the Reserve Banks. The Reserve Banks secure the currency they issue with legally authorized collateral, most of which is in the form of U.S. Treasury securities...
Words: 3381 - Pages: 14
...Economic policy is the government attempting to stabilize the economy for the good of all people. Ways in which the government attempts to reach their goals is by being in charge of setting the right levels of taxation, government budgets, money supply and interest rates in the economy. All of these actions that the government takes influence the economy in some way. “Some types of economic policy actions can include setting interest rates through a federal reserve, regulating the level of government expenditures, creating private property rights and setting tax rates” (economic policy). Economic policy has many goals. Economic growth is one goal. If incomes of consumers and businesses are increasing over time then economic policy is working well for the economy and its people. Full employment is another goal. This goal for economic policy is to ensure that every member of the labor force who wants to work will find work. The last goal to mention is price stability. The goal of price stability is to stop both deflation and inflation from occurring. If inflation is set too high then prices of goods in the economy will be too high and not sold as much because consumers will not be able to afford them. “In an effort to eliminate uncertainty, the Fed has set a target rate of a steady 2% inflation rate” (McMahon). The Federal Government has an involved role in maintaining America's economy; they need to find the right balance working with numbers and economic expertise. When...
Words: 2113 - Pages: 9
...FEDERAL RESERVE • In 1913 the Federal Reserve Act was passed, establishing reserve requirements for those commercial banks that chose to become members. • There are 12 Districts across America • It earns most of its income in the form of interest on its holding on US. Government securities as well as providing services to financial institutions. • The income earned is transferred to the Treasury • It regulates commercial banks and conducts monetary policy, adjusting the money supply to achieve full employment and price stability ( low inflation) • Has five major components o Federal Reserve District Banks o Member Banks o Board of Governors o Federal Open Market Committee o Advisory Committees Federal Reserve District Banks • Federal Reserve District Cities: o 1. Boston, Massachusetts o 2. New York, New York (Most important District City) o 3. Philadelphia. Pennsylvania o 4. Cleveland, Ohio o 5. Richmond, Virginia o 6. Atlanta, Georgia o 7. Chicago, Illinois o 8.St. Louis, Missouri o 9. Minneapolis, Minnesota o 10. Kansas City, Kansas o 11. Dallas, Texas o 12. San Francisco, California • Commercial banks that become members must purchase stock in the FED • Each District has 9 members o 6 are elected by member banks in which 3 are professional bankers and 3 are engaged in business o The remaining 3 are appointed by the Board of Governors o All nine directors appoint their Fed district bank president • District banks facilitate...
Words: 1233 - Pages: 5
...Macroeconomics Lynnette M. Phillips Everest University ECO- 3007-10 Macroeconomics Chapter 15: 1- The Fed Holds Depository Institutions’ Reserves & Provides Payment Clearing Systems- This acts as a regional clearinghouse to exchange or clear checks that have been deposited at one institution but written on another. The Fed settles checks by moving the funds required from a payee to payer institution, (credit union, savings institution or commercial banks). 2- Fed Acts as Government Fiscal Agent- The main services are insurance & redemption of securities on behalf of the Treasury, Federal agencies, other entities and the processing of payments to & from the Federal government. The Treasury & Reserve banks implement new web base technology to improve the Fed government’s provision with services in areas of security & payments, collections with government finance reports. The challenge is to manage complex & rapid information technologies while still being able to maintain high standards of security, efficiency and reliability. 3- Fed Conducts Monetary Policy- This is done by the nation’s central bank (Federal Reserve System) & influences demand mainly by raising & lowering short term interest rates. The Fed conducts monetary policy to fight inflation & promote economic growth. One of the most important tools for the Fed to conduct monetary policy is to open markets operations options to conduct monetary policy. 4- Fed Intervenes...
Words: 781 - Pages: 4
...Question 1 .2 out of 2 points Correct The Monetary Control Act: Answer Selected Answer: extended the Fed’s control to thrift institutions and non-member commercial banks Correct Answer: extended the Fed’s control to thrift institutions and non-member commercial banks . Question 2 .2 out of 2 points Correct Commercial banks obtain the bulk of their loanable funds from: Answer Selected Answer: depositors Correct Answer: depositors . Question 3 .2 out of 2 points Correct The holding-company device to control two or more commercial banks: Answer Selected Answer: has increased in importance in recent years Correct Answer: has increased in importance in recent years . Question 4 .2 out of 2 points Correct The primary purpose of this Act was to aid the savings and loan industry Answer Selected Answer: Garn–St. Germain Depository Institutions Act Correct Answer: Garn–St. Germain Depository Institutions Act . Question 5 .2 out of 2 points Correct The item on the liabilities and equity section of a bank’s balance sheet that represents the smallest proportion of bank’s assets is: Answer Selected Answer: owner’s capital Correct Answer: owner’s capital . Question 6 .2 out of 2 points Correct The Federal Deposit Insurance Corporation Improvement Act of 1991: Answer Selected Answer: required that failed banks be handled in such a way as to provide the lowest cost to the FDIC...
Words: 789 - Pages: 4
...The Federal Reserve System of the U.S. Origin The central banking system of the U.S., the Federal Reserve, was established on December 23, 1913 by the Federal Reserve Act of 1913. Prior to that date, the only official representative of the U.S. Treasury were the First Bank (1791-1811) and Second Bank (1816-1836). They were the sole source to issue and back official U.S. money. All other banks were either state or private organized with their own banknotes. As longs as money was deposited and withdrawn from the same financial institution there was no financial loss. But if depositors withdraw their money from a different bank, they never knew exactly what they would receive. As the U.S. grew in both people and economic and people were able to move more freely, a need for a more standardized banking system become necessary. In 1863, The National Bank Act was passed by Congress. Its purpose was to provide a supervised system of National Banks. These banks were to standardize banking operations, establish minimum capital to be held by banks and how loans were to be administered. They also mandated a 10% tax on banknotes owned by other banks. This eventually eliminated all other banknotes. After a severe financial panic in 1907 concerning Wall Street, many Americans felt that their banking structure was out of date and needed reform. In 1912, hearings were held to examine the U.S. banking system. The committee concluded that the U.S banking and financial system...
Words: 1369 - Pages: 6
...Week 4 macro PowerPoint notepad The Federal Reserve System is the central banking authority of the United States It acts as a fiscal agent for the United States government and is custodian of the reserve accounts of commercial banks, makes loans to commercial banks, and is authorized to issue Federal Reserve notes that constitute the entire supply of paper currency of the country. Created by the Federal Reserve Act of 1913, it is comprised of 12 Federal Reserve banks, the Federal Open Market Committee, and the Federal Advisory Council, and since 1976, a Consumer Advisory Council which includes several thousand member banks. The board of Governors of the Federal Reserve System determines the reserve requirements of the member banks within statutory limits, reviews and determines the discount rates established pursuant to the Federal Reserve Act to serve the public interest; it is governed by a board of nine directors, six of whom are elected by the member banks and three of whom are appointed by the Board of Governors of the Federal Reserve System. The Federal. Qualifications. The Federal Reserve System exercises its regulatory powers in several ways, the most important of which may be classified as instruments of direct or indirect control. One form of direct control can be exercised by adjusting the legal reserve ratio (the proportion of its deposits that a member bank must hold in its reserve account), and as a result, increasing or decreasing the amount of new loans that...
Words: 1667 - Pages: 7
...such as the Federal Reserve, to influence the availability and cost of money and credit to help promote national economic goals. The Federal Reserve Act of 1913 gave the Federal Reserve responsibility for setting monetary policy. The Federal Reserve controls the three tools of monetary policy--open market operations, the discount rate, and reserve requirements. The Board of Governors of the Federal Reserve System is responsible for the discount rate and reserve requirements, and the Federal Open Market Committee is responsible for open market operations. Using the three tools, the Federal Reserve influences the demand for, and supply of, balances that depository institutions hold at Federal Reserve Banks and in this way alters the federal funds rate. The federal funds rate is the interest rate at which depository institutions lend balances at the Federal Reserve to other depository institutions overnight. Changes in the federal funds rate trigger a chain of events that affect other short-term interest rates, foreign exchange rates, long-term interest rates, the amount of money and credit, and, ultimately, a range of economic variables, including employment, output, and prices of goods and services. Structure of the FOMC The Federal Open Market Committee (FOMC) consists of twelve members--the seven members of the Board of Governors of the Federal Reserve System; the president of the Federal Reserve Bank of New York; and four of the remaining eleven Reserve Bank presidents,...
Words: 408 - Pages: 2
...How does Federal Reserve Control the Money Supply? Federal Reserve or simply “the Fed” is an independent entity whose main goal is to provide the nation with a safer, more flexible, and more stable monetary and financial system. It is the central bank of the United States that influences the monetary policy by controlling the money supply and cost of money in able to give the economy full employment, low inflation rate, and stable prices. Manipulating money supply is a very powerful tool use by the Fed to stabilize the economy. So how does the Federal Reserve control the money supply? The Fed uses three different methods to increase or decrease the amount of money supply in the economy. The first method is by conducting open market operations, which affects the federal funds rate. In open-market operations, the Fed buys and sells government securities in the open market. If the Fed wants to increase the money supply, it buys government bonds. This supplies the securities dealers who sell the bonds with cash, increasing the overall money supply. Conversely, if the Fed wants to decrease the money supply, it sells bonds from its account, thus taking in cash and removing money from the economic system. Open-market operations are the most important tool that the Fed can use to influence the money supply. Perfect example was during the recession of 2007 – 2009. The primary tool that the Fed used early during the current crisis was to cut the Federal Funds rate. The Fed initially conducts...
Words: 650 - Pages: 3
...Federal Reserve’s Publication Describe the Federal Reserve’s assessment of the current economic activity and financial markets. The U.S macro economy experiencing a notable extended period of economic expansion led to people believing that the U.S’ economy had become less volatile and prone to recession. Our economy’s growth slowed significantly and was threatened to enter the first recession of the millennium in mid-2000. According to the Federal Reserve the situation of our economy can be viewed from two points of view. The first one suggests that the slowdown in our economy is temporary, short-lived, and reversible meaning its recovery can be “V-shaped.” The second one suggests that the recession will last longer, a more drawn out slowdown, and followed by a weaker and more sluggish recovery also called “U shaped” recovery. This later view is associated with asset price deflation as well as burdensome debt. The current economic activity appears to be moving on the right direction and reversing itself into a near-term recovery. Also another aspect of it is the signs of potential risk of longer-term casual factors at work. The suggestion based on the fragility of the economy is that policymakers must be prepared to react and further preventive steps should be considered. Explain the Federal Reserve’s current view about inflation. There are two types of inflation that are closely tied to each other. Monetary inflation is an increase in the money supply. Price inflation...
Words: 1356 - Pages: 6
...Liquidity risk & Management-Basic Bank Course Title: Management of Financial Institution Course Code: F-637 Submitted to Tahmina Akter, Assistant Professor department of finance university of Dhaka Submitted by Md Abdullah-Al-Hasan,ID-13007. Md Rukonuzzaman, ID-20026. Ajanta Shukla Tanma,ID-21050 Moin Uddin, Id-20035 AHMED SHARIF, ID-19011. Introductory Part Letter of transmittal 17 August, 2013 Tahmina Akter, Assistant Professor Department of Finance Faculty of Business Studies University of Dhaka Subject: Submission of the Term Paper Dear Madam, We are pleased to present you this term paper titled “Liquidity risk and management-Basic Bank” as partial requirement of the Management of Financial Institution course. Working for this report has been an enlightening & informative experience. Your guideline has been followed in every aspect of preparing this report. With our limited knowledge in this field we have presented what we believed to be relevant and rational information. We have enjoyed working on this report and hope that our work will meet the level of your expectation. We will be always available for any further query. Yours sincerely, Md Abdullah-Al-Hasan,Id-13007. Md Rukonuzzaman, Id-20026. AJANTA SHUKLA TANMA,ID-21050 Moin Uddin, Id-2003 AHMED SHARIF, ID-19011. LETTER OF ACCEPTANCE This report is prepared during the relevant documents...
Words: 8166 - Pages: 33
...financial markets impact the economy, businesses, and individual by the movement of funds among financiers, businesses and governments. It involves investments in the area of sales or marketing of securities, the management of investment risk through portfolio diversification and the analysis of securities. Melicher, R. W., & Norton, E. A. (2011).Pg. 6 The U.S. Federal Reserve is the central bank of the United States and is responsible for regulating the banking system, setting monetary policy by influencing money and credit conditions in the economy in pursuit of full employment and stable prices. ("What is the," 2013) The role of the U.S. Federal Reserve is important for the U.S. payment system. It provides banking service for the twelve Federal Reserve Banks by providing banking service to depository institutions and to the federal government. The depository institutions maintain accounts including collecting checks and provide various payment services, distributing and receiving currency and coin, and electronically transferring funds. Melicher, R. W., & Norton, E. A. (2011). The Federal Reserve Chairman is a position with high ethical standards and morals; a high standard are a must. A successful chair must have the confidence and trust of the president and Congress and bank officers, foreign officials, business leaders, and the general public. Citizens must have confidence that the chair will do what is right for the economy and humanity. Melicher, R. W., &...
Words: 972 - Pages: 4
