FED and Hierarchy of Governance Questions Responses

FED and Hierarchy of Governance Questions Responses

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FED and Hierarchy of Governance Questions Responses

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Watch the attached video then click on the above link “The Fed ” and post a response to each of the bullets below.

What is the mission, or goals, of the Fed?

Explain the structure of the Fed and the hierarchy of governance.

Is the Fed a public or private entity? Who owns the Fed?

If issuing Federal Reserve Notes stimulates the economy, why not print money indefinitely?

Under what conditions would the Fed purchase securities like U.S. treasuries?

How does the Fed regulate and supervise banks and why is this important?

What services does the Fed provide to our country’s financial system and how did it come to be known as the “Bankers Bank”?

Visit the debt clock website at http://www.usdebtclock.org/ (Links to an external site.) and locate the category M2. This is the present money supply in the hands of the public. Using a timer determine how much the money changes in 1 minute. Is it increasing or decreasing? What do you think this means for the overall economy?

student response.

Rami

The mission or goal of the Fed is -The Federal Reserve works to encourage a strong United States economy. The Congress has directed the Fed to conduct the nation’s monetary policy to support three specific goals which are: a) Maximum sustainable employment, b) Stable prices, c) Moderate long-term interest rates.

Note that these goals are sometimes referred to as the Fed’s “mandate.

The federal system, composed of a central, independent governmental agency, the Board of Governors–in Washington, D.C., and 12 regional Federal Reserve Banks, located in very big cities throughout the nation and these components share responsibility for supervising and regulating certain financial institutions and activities. I addition to that, providing banking services to depository institutions and to the federal government; and ensuring that consumers receive adequate information and fair treatment in their business with the banking system.

The Federal Reserve is not a private corporation. It is part private and part public, with its Board of Governors an agency of the United States government. The regional Federal Reserve Banks are private corporations acting as agents of the government that are owned by their member banks. The Federal Reserve is an independent entity established by the Federal Reserve Act of 1913.

Unless there is an increase in economic activity commensurate with the amount of money that is created, printing money to pay off the debt would make inflation worse. This would be, as the saying goes, “too much money chasing too few goods.”

One of the major tools available to the Fed is open market operations (OMO), which involves the Fed buying or selling Treasury bonds in the open market. This practice is akin to directly manipulating interest rates in that OMO can increase or decrease the total supply of money and also affect interest rates. If the Fed buys bonds in the open market, it increases the money supply in the economy by swapping out bonds in exchange for cash to the general public.

The Federal Reserve System plays a very important role in both bank supervision and bank regulation.

Bank supervision — Includes the following activities designed to evaluate the condition of a banking organization and ensure its compliance with banking laws and regulations:

Examining banking organizations

Monitoring banking organization

Several key components of the examination and monitoring of banks for safety and soundness purposes by bank regulators are:

Evaluating the banking organization’s capital adequacy

Reviewing the banking organization’s risk profile

Establishing regulatory ratings for capital, assets, management, earnings, and liquidity

Bank regulation — Federal legislation requires the Fed to set regulations that govern the conduct and competitive structure of the banking industry by:

Implementing regulations

Issuing guidelines

Federal Reserve Banks are often called the “bankers’ banks” because they provide services to commercial banks similar to the services that commercial banks provide for their customers. Federal Reserve Banks distribute currency and coin to banks, lend money to banks, and process electronic payments. Reserve Banks also serve as fiscal agents for the U.S. government. They maintain accounts for the U.S. Treasury, process government checks, and conduct government securities auctions.

Dalia

1-What is the mission, or goals, of the Fed?

The Federal Reserve Bank is the central bank of the United States and was created in 1913. Their mission is to establish and maintain public confidence in our nation’s monetary banking system. It has been expanded to include responsibility for providing a stable, healthy economy and growth.

2. Explain the structure of the Fed and the hierarchy of governance.

Throughout the 1800s, almost any organization could print its own money. At one point there were over 30,000 different versions of currency. People lost faith in the entire financial system. Banks didn’t have enough money on hand to pay the depositors sometimes, which resulted in some banks closing and people lost all their savings. So, in 1913, President Wilson signed into effect the Federal Reserve Act, which created the Federal Reserve System to provide a safer and more stable monetary and banking system. Throughout the nineteenth century, almost any organization could print its own money. At one point there were over 30,000 different copies of the coin. People have lost faith in the entire financial system. Banks did not have enough money on hand to pay depositors at times, which resulted in some banks closing and people losing all of their savings. Therefore, in 1913, President Wilson entered into force the Federal Reserve Act, which created the Federal Reserve System to provide safer and more stable cash and banking system. The Federal Reserve is designed to be a decentralized central bank. It consists of two main parts; the Board of Governors, which directs most of the Fed’s policies, and twelve regional Federal Reserve banks and their subsidiaries which are operating weapons that provide services to banks and the public in their regions. The Board of Governors is appointed by the government and confirmed by the Senate, and represents the public sector or government side of the Federal Reserve. The twelve reserve banks and their board of directors represent the private sector and local citizens on their board of directors. This structure provides accountability while avoiding central government control of banking and monetary policy.

3. Is the Fed a public or private entity? Who owns the Fed? The Fed has a unique public/private structure that operates independently in the government but not independent of it.
4. If issuing Federal Reserve Notes stimulates the economy, why not print money indefinitely? The Fed stimulates price stability. As the money supply grows, and more money becomes available, the demand for goods also grows. When the money supply grows faster than the production of goods and services, prices usually begin to rise, which can lead to inflation. If the money supply decreases, the demand for goods decreases as well. Prices can drop and manufacturers and companies can produce fewer goods. This situation is called stagnation.
5. Under what conditions would the Fed purchase securities like U.S. treasuries?

Securities are investments in the United States government, and the government buys these securities to stabilize the country’s supply to prices for goods and services is also increasing, which could lead to inflation or in bank buildings. The bank received a rating. The Federal Reserve requires the bank to take corrective action if there are any potential problems.

6. How does the Fed regulate and supervise banks and why is this important?

Congress has established rules governing the supervision and regulation of banks operating in the United States. The main purpose is to enhance the safety and integrity of banks, which enhances public confidence in the financial system. The Fed monitors banks and bank holding companies. Federal examiners look at the records, the potential risks of bank investments, and see if the bank follows the laws in force. This supervision is carried out off-site using automated financial inspection rules or in the bank buildings. The bank received a rating. The Federal Reserve requires the bank to take corrective action if there are any potential problems.

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7. What services does the Fed provide to our country’s financial system and how did it come to be known as the “Bankers Bank”?

The Federal Reserve plays a major role in the country’s payment system, which transfers money or payments from one bank to another. This is done either in cash or by checks in wire transfers. Because of this role for this reason the Federal Reserve is known as the Banking Bank. One of her roles is to work as a financial agent or as a bank for the United States and keep American Treasury bond accounts.

The money is increasing in the category M2. For the overall economy, since it is increasing, it means the price of goods and services is increasing as well, which could potentially lead to inflation.

FED and Hierarchy of Governance Questions Responses

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