FEDERAL RESERVE SYSTEM

FEDERAL RESERVE SYSTEM(U.S.A.) : 

FEDERAL RESERVE SYSTEM(U.S.A.)

Introduction : 

Introduction Established in 1913 Response to previous financial panics (especially 1907) Established with the passing of the Federal Reserve Act

Federal Reserve Act : 

Federal Reserve Act Minimum 8 and Maximum 12 Federal Reserve Banks were to be established 7 member board headed the system 12 member advisory committee to assist in daily operations Nationally Chartered Banks have to be members of the system and own non-transferable stock in their own reserve bank

Amendment : 

Amendment Federal Open market Committee (FOMC) was created in 1933 Consists of the 7 governors and 5 other representatives from the Federal Reserve Banks Oversee all Open Market Operations (OMOs)

Federal Reserve Banks : 

Federal Reserve Banks

Location of Fed Reserve Banks(HQs) : 

Location of Fed Reserve Banks(HQs) Boston New York City Philadelphia Cleveland Richmond Atlanta Chicago St. Louis Minneapolis Kansas City Dallas San Francisco

Tools to Implement Monetary Policies : 

Tools to Implement Monetary Policies Open Market Operations Controls money supply in banking system Done through sale and purchase of U.S. government securities Engages in repurchase(repo/reverse repo) agreements with its primary dealers

Primary Dealers : 

Primary Dealers Bank Of America Securities Barclays Capital Citigroup Credit Suisse Securities Deutsche Bank Securities Goldman Sachs HSBC Securities J.P. Morgan Securities Morgan Stanley RBS Securities

Reserve Requirements : 

Reserve Requirements Currently , the Fed pays an interest of 0.25% for the money parked with it

Slide 10: 

Set Federal Funds Rate and the Discount Rate Federal Funds Rate : Rate that banks charge each other for overnight lending of federal funds (currently 0.25%) Discount Rate : Rate for “discount window lending” i.e. the rate at which member banks directly borrow from the Fed (generally 3 percentage points higher than the Federal Funds Rate)