Module 26 The Federal Reserve System History and

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Module 26 The Federal Reserve System: History and Structure KRUGMAN'S MACROECONOMICS for AP* Margaret

Module 26 The Federal Reserve System: History and Structure KRUGMAN'S MACROECONOMICS for AP* Margaret Ray and David Anderson

What you will learn in this Module: • The history of the Federal Reserve

What you will learn in this Module: • The history of the Federal Reserve System • The structure of the Federal Reserve System • How the Federal Reserve has responded to major financial crises

The Federal Reserve System • Who monitors banks and the money supply? • Central

The Federal Reserve System • Who monitors banks and the money supply? • Central Bank

An Overview of the Twenty-first Century American Banking System • Mostly calm with moments

An Overview of the Twenty-first Century American Banking System • Mostly calm with moments of sheer panic • Creation of the Federal Reserve System

Crisis in American Banking at the Turn of the Twentieth Century • Money Supply

Crisis in American Banking at the Turn of the Twentieth Century • Money Supply Tug-of-War • Trusts • Speculation • Pyramid Reserves • Knickerbocker Trust • J. P. Morgan Saves the Day

Responding to Banking Crises: The Creation of the Federal Reserve • Frequent Bank Crises

Responding to Banking Crises: The Creation of the Federal Reserve • Frequent Bank Crises • National Banking System Eliminated • Centralized Control of Bank Reserves • Federal Reserve’s Money Monopoly

The Structure of the Fed

The Structure of the Fed

The Effectiveness of the Federal Reserve System • Potential for Bank Runs still existed

The Effectiveness of the Federal Reserve System • Potential for Bank Runs still existed • Reconstruction Finance Corporation (RFC) • Glass-Steagall Act of 1932 • FDR’s Bank Holiday • RFC takes control

The Effectiveness of the Federal Reserve System • Glass-Steagall Act of 1933 • Commercial

The Effectiveness of the Federal Reserve System • Glass-Steagall Act of 1933 • Commercial Banks • Regulation Q • Investment Banks • Glass-Steagall Weakened

The Savings and Loan Crisis of the 1980 s • Savings and Loans (Thrifts)

The Savings and Loan Crisis of the 1980 s • Savings and Loans (Thrifts) • Political Interference • Tax-Payers • Inflation’s effect on the S&Ls • Speculation • Comprehensive Oversight

Back to the Future: The Financial Crisis of 2008 • Similarities to previous crises

Back to the Future: The Financial Crisis of 2008 • Similarities to previous crises • Long-term Capital Management • leverage • balance sheet effect • vicious cycle of delevereaging

Back to the Future: The Financial Crisis of 2008 • Subprime Lending and the

Back to the Future: The Financial Crisis of 2008 • Subprime Lending and the Housing Bubble • subprime lending • securitization • TED Spread

Back to the Future: The Financial Crisis of 2008 • Crisis and Response •

Back to the Future: The Financial Crisis of 2008 • Crisis and Response • Fed balance sheet • Bear Stearns v. Lehman Brothers • Capital Injections • The future?