Federal Reserve and Hierarchy of Governance Questions

Federal Reserve and Hierarchy of Governance Questions

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Federal Reserve and Hierarchy of Governance Questions

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DB 4: The Fed

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”?

REPLY TO

Jacob

1) The Federal Reserve works to promote a strong U.S. economy. The Congress has directed the Fed to conduct the nation’s monetary policy to support three specific goals: maximum sustainable employment, stable prices, and moderate long-term interest rates.

2) designed to be a decentralized central bank, with 2 parts. a board of governs who help guide the policies, and 12 regional fed banks

3) 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.

4) 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.

5) The Fed will purchase securities when it’s detected that there is too little money in circulation just as they would sell if there is too much money.

6) it is important to monitor these banks to promote the safety of them. They supervise by looking through financial records and checking to see if the bank is following the proper laws. Overall, it is to maintain a stable banking system.

7) 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.

8) Within the 60 seconds I timed it increased roughly 7.5 million in that time. Since the M2 is sum of M1 and savings deposits I think it is beneficial to the economy that it is increasing.

Chad Bear

What is the mission, or goals, of the Fed? To establish and maintain the public’s confidence in our nations monetary and banking system. To maintain and stabilize the economy.

Explain the structure of the Fed and the hierarchy of governance. Two parts, a board of governors that guide most of the policies and 12 regional federal reserve banks and their branches which provide services to banks and the public in their regions.

Is the Fed a public or private entity? Who owns the Fed? A unique public private structure operating independently within the gov but not independently from it. The Fed is owned by no one.

If issuing Federal Reserve Notes stimulates the economy, why not print money indefinitely? It will create inflation which devalues our money so the price of everything will rise countering the effects of printing more money.

Under what conditions would the Fed purchase securities like U.S. treasuries? If there is too little money in circulation to prevent a recession.

How does the Fed regulate and supervise banks and why is this important? They monitor banks and bank holding companies by looking at financial records and risks as well as ensuring they are following laws. It promotes the safety and security of the banks ensuring the public’s confidence, something banks didn’t do previously.

What services does the Fed provide to our country’s financial system and how did it come to be known as the “Bankers Bank”? Transfers funds from one bank to another. Acts as the bank for the US, maintains the US Treasuries accounts. Issues services and redeems treasury securities.

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? In 1 minute, I watched the money supply increase about 7 million dollars. With an increasing supply this means the Fed is buying securities to stabilize the economy to prevent a potential recession.

Federal Reserve and Hierarchy of Governance Questions

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