Federal Reserve System Abhinav Thaalla 13020862001 What is

Federal Reserve System Abhinav Thaalla 13020862001

What is the Fed ? The Fed is the Central Banking System of the United States Conducts the Nations Monetary Policy Supervises and Regulates Banking Institutions Maintains the Stability of the Financial System Provides Financial services to the Depository Institutions, the US Government and foreign official Institutions Headed by the Board of Governors in Washington, DC It is “Independent, within the Government”

History Enacted by the Federal Reserve Act in 1913. It was created by the Congress to provide the nation with a safer, more flexible, and more stable monetary and financial system Made to address the ‘panics’ caused by the fragile financial banking systems in the early 1900’s The Great Depression of the 1930’s caused great changes to its roles. Today, the roles and responsibilities of the Federal Reserve System have expanded, and its structure has evolved greatly

Responsibilities of the Fed 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

Structure

12 District Banks Reserve Banks carry out the Fed's policies at a regional level. Day to day, the banks execute the banking and consumer protection laws enacted by Congress and the regulatory policies adopted by the Board of Governors. The Reserve Banks also play a critical role in bringing local economic perspectives to the national arena. When Congress created the Federal Reserve System in 1913, it established 12 Federal Reserve Districts so that every part of the country would be represented in the System. Each District has a Federal Reserve Bank that serves and supervises member banks in that particular District.

Federal Open Market Committee (FOMC) The FOMC is the Fed's monetary policymaking body. It is responsible formulation of a policy designed to promote stable prices and economic growth. the FOMC manages the nation's money supply. The voting members of the FOMC are the Board of Governors, the president of the Federal Reserve Bank of New York and presidents of four other Reserve Banks, who serve on a rotating basis. The FOMC typically meets eight times a year in Washington, D. C. At each meeting, the committee discusses the outlook for the U. S. economy and monetary policy options.

Board of Governors The Board of Governors, located in Washington, D. C. , provides the leadership for the Fed. The Board consists of seven members who are appointed by the president of the United States and confirmed by the Senate. The Board's most important responsibility is participating in the Federal Open Market Committee (FOMC), which conducts our nation's monetary policy Heading the Board of Governors are a Chair and Vice Chair. The current Chair of the Board of Governors is Janet Yellen. This is a highly visible position

The congress and the fed Independent entity FEDERAL Monetary policy decisions do not have to be approved RESERVE by the President or anyone else Creates it’s own revenue, does not receive funding from Congress Operates 12 Twelve regional Federal Reserve Banks Created the Fed Oversees the Fed Reviews the Fed's activities Can alter the Fed’s Statutes Appoints the Board members US CONGRESS

Open Market Operations 1. Buying and selling previously issued securities 2. Add credit to banking system when they buy securities from dealers 3. Drain credit when they sell securities to dealers 4. This determines the federal funds rate

Discount rate policy 1. Make Short Term Loans to Banks to Help with Reserves 2. Raise the rate- slows economy, checks inflation 3. Lower the Rate- stimulates economic growth

Reserve Requirements 1. Raise the Amount- Reduce Lending 2. Lower Reserve Amount- Increase Lending 3. Not changed much, last change was in 1992 from 12% to 10%

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