Coins Coins are metallic forms of money such as pennies, nickels, and dimes.
Currency Currency includes both coins and paper money.
Commercial Banks Commercial banks are the most important part of the financial system because of their large areas of influence. Example: BB&T, RBC, Suntrust Commercial banks are institutions that offer full banking services to individuals and businesses. They are the places that offer checking accounts and debit cards, saving accounts, and certificates of deposits (CDs) to their comsumers.
Savings and Loans Savings and loan associations are institutions that traditionally loan money to people buying homes. -Today, S&Ls perform many of the activities that commercial banks do
Credit Unions Credit unions are institutions that are open only to members of the group and work on a not-for-profit basis. -They are often sponsored by businesses, labor unions, or government institutions.
FDIC The most important insurance agency is the Federal Deposit Insurance Corporation (FDIC). -It insures individual accounts in financial institutions for up to $100,000.
Monetary Policy Government’s policy on controlling the money supply and the cost of borrowing money.
This is the rate that the Fed charges banks for loans. The Fed can raise or lower the discount rate.
If the Fed want to stimulate the economy, it will lower the discount rate. If it wants to slow down the economy, it will raise the discount rate.
Reserve This is how much money the federal reserve can require banks to keep.
Open Market Operations These are bonds and bills that the Fed can buy. If the Fed buys bonds from investors, it puts more cash in investor's hands, increasing the money supply.
Checking And Savings Accounts Checking accounts are accounts that allow customers to write checks or use check cards . Savings accounts where people save money. These are accounts that pay interest to customers based on the amount they have deposited
Certificates of Deposits Accounts where customers leave the money in for an extended amount of time for increased interest than a savings account
National Banking Act
Created dual banking which allowed banks to have state or national charters.
National banks issue banknotes which are backed by U.S. government bonds.
Federal Reserve Act
Serves as nation’s central bank with power to regulate reserves in national banks, make loans to member banks, and control the money supply.
Prints Federal Reserve notes as the major form of currency.
Glass-Steagall Banking Act
Congress passed the Glass-Steagall Banking Act which established the FDIC.
It also allows the FDIC to regulate the S&L industry.
Allows bank holding companies freedom to have full range of banking services, including banking, insurance and securities.
Advantage-creation of universal banks
Disadvantage-weaken competition among banks for services
Board of Governors
Runs the Federal Reserve.
Seven members make up board.
President appoints and Congress confirms members.
President selects one member as chairman of the board for 4 years .
Interest When you borrow money from the bank, this is the amount of money added to the loan for borrowing the money. The interest is what you pay the bank for using their money.
Central Bank The nation’s central bank is the Federal Reserve. They control the nation’s money.