ByTweed Financial Services
1775-91• Continental Congress printed fiat money, which soonbecame worthless due to high inflation1791-18111816-36• First ...
CivilWar• NationalCurrency Actallowed forchartering ofnational banks• Amendmentrequired taxationon state banknotes, but no...
Conducting the nations monetary policy to promote maximumemployment, stable prices, and moderate long-term interest rates•...
TO EXECUTE MONETARYPOLICY Open Market Operations: thebuying and selling of USTreasury Securities Reserve Requirements: t...
Marketable securities can be bought, sold, or transferredafter the original issue264 auctions conducted in 2012$7.9 trilli...
Source: Mish’s Global EconomicTrendAnalysis
FederalOpenMarketCommitteeBoard ofGovernorsSupervisesReserveBanks, etc.5 out of 12RegionalReserveBankPresidentsSupervisesM...
 Composed of 7 board ofgovernor members + 5reserve bank presidents;- NY Reserve Bankpresident is always amember, others h...
Functions:- Supervises andregulates regionalreserve banks- Thorough analysis offinancial and economicdevelopments- Exercis...
 Each Regional ReserveBank has a 9- memberboard• Implements monetarypolicy set by Fed• Responsible for memberbanks* and c...
USTreasury• Prints Currency• Takes money from Reserve Banks fortax rebatesThe Fed• Distributes currency to Reserve Banks• ...
 Used to meet unexpectedcash outflows, and toprocess check andelectronic payments Can be held as “cash onhand” or at reg...
Tweed Financial Serviceskla-46-0613
1 http://www.federalreserveeducation.org/about-the-fed/history/2 http://www.federalreserve.gov/pf/pdf/pf_1.pdf#page=43 htt...
Graph of Discount Rateshttp://www.alphaprofit.com/Money/Federal-Reserve-Discount-Rate-Investment-Decisions-1.html#.Ua4wm0C...
Federal Reserve Board Powerpoint
Federal Reserve Board Powerpoint
Federal Reserve Board Powerpoint
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Federal Reserve Board Powerpoint

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Federal Reserve Board Powerpoint

  1. 1. ByTweed Financial Services
  2. 2. 1775-91• Continental Congress printed fiat money, which soonbecame worthless due to high inflation1791-18111816-36• First and Second Bank of US charters not renewed1836-63• Decentralized banking : state banks began issuing theirown currencies => subject to counterfeiting,inefficient1
  3. 3. CivilWar• NationalCurrency Actallowed forchartering ofnational banks• Amendmentrequired taxationon state banknotes, but notnational banknotes1907: Panic• Depositorswithdrewfunds, 2nd and3rd largestbanks closed• JP Morganbacked otherbanks torestore faith1908• AldrichVreelandAct,Aldrich Plan• Helped to formideas thatbecame basisfor FederalReserveAct ¹
  4. 4. Conducting the nations monetary policy to promote maximumemployment, stable prices, and moderate long-term interest rates• Supervising and regulating banks and other importantfinancial institutionsMaintaining the stability of the financial system and containingsystemic risk that may arise in financial markets.• Fight inflationProviding certain financial services to the U.S. government, U.S.financial institutions, and foreign official institutions2Federal Reserve Act signed byWoodrowWilson in 1913Federal Reserve Board Established
  5. 5. TO EXECUTE MONETARYPOLICY Open Market Operations: thebuying and selling of USTreasury Securities Reserve Requirements: therequired cash a financialinstitution must keep at theFed ³ Discount Rate*: rate at whichthe Fed lends cash to banks =>the prime rate banks chargecustomers for loans 4*Rate is reviewed every 14 days by eachreserve bank 5
  6. 6. Marketable securities can be bought, sold, or transferredafter the original issue264 auctions conducted in 2012$7.9 trillion in securities issued in 2012Competitive bidding (accepted at ascending order of rateand yield)Noncompetitive bidding (agrees to accept rate or yielddetermined at auction, limited to 5 MM/bid)Auctions onTreasuryDirect.gov (Bureau of Public Debt)- traded with broker/ dealer or financial institution6
  7. 7. Source: Mish’s Global EconomicTrendAnalysis
  8. 8. FederalOpenMarketCommitteeBoard ofGovernorsSupervisesReserveBanks, etc.5 out of 12RegionalReserveBankPresidentsSupervisesMemberBanks
  9. 9.  Composed of 7 board ofgovernor members + 5reserve bank presidents;- NY Reserve Bankpresident is always amember, others have 1year terms Implements nationalmonetary policy Determines holdings offoreign currencies 7
  10. 10. Functions:- Supervises andregulates regionalreserve banks- Thorough analysis offinancial and economicdevelopments- Exercises broadresponsibility innation’s paymentsystem- Carries out othercomponents Federalreserve system ²Chairman:Ben BernankeVice Chair:JanetYellenAppointed by thePresident andconfirmed by Senate- serve 4- year terms
  11. 11.  Each Regional ReserveBank has a 9- memberboard• Implements monetarypolicy set by Fed• Responsible for memberbanks* and commercialbanks in district ²*A member bank is a private institutionthat owns stock in its own regionalreserve bank
  12. 12. USTreasury• Prints Currency• Takes money from Reserve Banks fortax rebatesThe Fed• Distributes currency to Reserve Banks• Acts as government’s banker byaccepting payments, issuing payroll,etc.• Sells and redeemsTreasury Securities• After paying its expenses, it gives therest of its earnings to theTreasury8
  13. 13.  Used to meet unexpectedcash outflows, and toprocess check andelectronic payments Can be held as “cash onhand” or at regionalbanks’ reserves, or both Fed can change therequired reserve amountat banks- But Fed changes supply ofreserves through selling orbuying securities9
  14. 14. Tweed Financial Serviceskla-46-0613
  15. 15. 1 http://www.federalreserveeducation.org/about-the-fed/history/2 http://www.federalreserve.gov/pf/pdf/pf_1.pdf#page=43 http://www.federalreserve.gov/monetarypolicy/fomc.htm4 http://www.foundationsforliving.org/articles/foundation/fedraiselower.html5 http://www.investopedia.com/terms/f/federal_discount_rate.asp6 http://www.treasurydirect.gov/instit/auctfund/work/work.htm7http://www.federalreserve.gov/faqs/about_12844.htm8 http://www.investopedia.com/articles/economics/08/treasury-fed-reserve.asp9 http://www.howstuffworks.com/fed8.htm
  16. 16. Graph of Discount Rateshttp://www.alphaprofit.com/Money/Federal-Reserve-Discount-Rate-Investment-Decisions-1.html#.Ua4wm0CsiSoTreasury Securities Maturity/Yield Ratehttp://www.frbsf.org/education/activities/drecon/2002/0206.htmlhttp://globaleconomicanalysis.blogspot.com/2012/07/record-low-yields-once-again-on-us.html

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