To understand the purpose and role of the Federal Reserve System, we must first know the origin of the central bank of the United States. On December 23, 1913 President Woodrow Wilson signed The Federal Reserve Act. The primary purpose of the act was to make sure that a supply of money and credit would be available in the United States to meet banking demands by establishing Federal Reserve Banks which would hold the responsibility of supporting the credit structure during periods of financial strain. Other banks were expected to rely on the Federal Reserve for emergency cash and credit. Government and banking influence would select the management, primarily a board of directors chosen by banks. Supervision would be by the Federal Reserve Board. The intent in 1913 was to create eight to twelve centrally located district Federal Reserve Banks and national banks would be required to keep a part of their reserve with the Federal Reserve. The Federal Reserve would receive deposits from the government and receive deposits and lend to member banks only. It took almost a year to determine the boundaries of the decided twelve districts and establish the twelve Reserve Banks (one of the four components of the Federal Reserve). Named after the city in which they are located, the twelve Banks are Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas, and San Francisco.
The Federal Reserve plays a significant role in maintaining the stability and liquidity (the ability to turn an asset into cash) of the financial system by working towards low and stable inflation and also strive to encourage growth in output and employment . A second component, the Federal Reserve Board...
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...y 10). Retrieved May 23, 2012, from Board of Governors of the Federal Reserve System: http://www.federalreserve.gov/newsevents/press/other/20110110a.htm
Press Release. (2012, January 11). Retrieved May 23, 2012, from Board of Governors of the Federal Reserve System: http://www.federalreserve.gov/newsevents/press/other/20120110a.htm
(1914). The Federal Reserve Act of 1913. In O. Sprague, The Quarterly Journal of Economics, Vol. 28 No. 2 (pp. 213-254). Oxford University Press.
The Budgetary Impact and Subsidy Costs of the Federal Reserve's Actions During the Financial Crisis. (n.d.). Retrieved May 21, 2012, from CBO: http://www.cbo.gov/publication/21491
Who are the members of the Federal Reserve Board, and how are they selected? (n.d.). Retrieved May 21, 2012, from Board of Governors of the Federal Reserve System: http://www.federalreserve.gov/faqs/about_12591.htm
-1. How could the Federal Reserve prevent and solve financial crisis? – The function of Federal Reserve.
Before we begin our investigation, it is imperative that we understand the historical role of the central bank in the United States. Examining the traditional motives of this institution over time will help the reader observe a direct correlation between it and its ability to manipulate an economy. To start, I will examine one of its central policies...
Mallin, Jay. "Federal Reserve (Fed).” The New York Times, n.d. Web. March 21, 2012. .
Another federal legislation that was passed into law during the period was the Federal Reserve Act. The Federal Reserve Act of 1913, focused its energies on creating a new banking system with twelve regional Federal Reserve Banks, and each of whom were owned by member banks in its district. Also, all of the national banks automatically were members while state banks could join if they wished.
The Federal Reserve controls the economy of the United States through a variety of tools. They use these tools to shape the monetary policy of the United States in order to promote economic growth and reduce the rate of inflation and the unemployment rate. By adjusting these tools, the Fed is able to control the amount of money in the supply. By controlling the amount of money, the Fed can affect the macro-economic indicators and steer the economy away from runaway inflation or a recession.
Over the past few years we have realized the impact that the Federal Government has on our economy, yet we never knew enough about the subject to understand why. While taking this Economics course it has brought so many things to our attention, especially since we see inflation, gas prices, unemployment and interest rates on the rise. It has given us a better understanding of the effect of the Government on the economy, the stock market, the interest rates, etc. Since the Federal Government has such a control over our Economy, we decided to tackle the subject of the Federal Reserve System and try to get a better understanding of the history, the structure, and the monetary policy of the power that it holds.
With the United States was in the middle of the Great Depression, and after withstanding many financial situations and the bank runs in 1907. The treasury was forced to give up control of the country’s money when Congress established the Federal Reserve (The Fed) in order to give the citizens some sort of security when saving their money in banks. Also to prevent the runs on the banks which caused quite a few banks to close and a lot of people to lose their money.
The Federal Reserve is the central bank of the United States of America. The Federal Reserve has the ability to directly influence the economy. The purpose of the Federal Reserve is to create and maintain a stable monetary and financial policy, when this goal is achieved Americans are more likely to trust the government with their money. If Americans trust the government with their money, then the people will deposit their money into banks, which the banks will then lend out boosting the economy. Since the Federal Reserve is associated with the government, many citizens believe that monetary policy will emulate the current president’s views and opinions. While what the president does will affect the economy and consequently the Federal
Martenson, Chris. "The Shell Game - How the Federal Reserve is Monetizing Debt - Aug. 25, 2009 | Blogs at Chris Martenson - Central Banks, Chris Martenson's Blog, Federal
Cabral, R. (2013). A perspective on the symptoms and causes of the financial crisis. Journal of Banking & Finance, 37, 103-117
Author Unknown (1994). The Federal Reserve System: Purposes and Functions (5th ed.) Published by Library of Congress
United States Federal Reserve. (February 11, 2014). Monetary Policy Report. Retrieved June 18, 2014, from http://www.federalreserve.gov/monetarypolicy/mpr_20140211_summary.htm
6. Data Download Program, The Federal Reserve Board, 5 Aug 2009, web. 6Dec. 2009 www.federalreserve.gov/datadownload,
As we are moving to the end of the course, we want to present you with the Federal Reserve System (Fed), which is the central bank of the USA. We are going to explore the roles of Fed in regularizing the economy, its function, and also the tools used in doing that. We will learn how central banks regulate the banking system and how they manage money supply in economies. We will also be presented to the financial crises lessons we can be able to understand the importance of the regulatory system; and then, we answering questions such as:
Perloff, J. (2009, April 13). How the Monetary Mayhem Began: The Federal Reserve Has Inflicted a Century of Financial Havoc on Americans. Looking at How This Came to Pass Reveals Who Desires This State of Affairs and How They Profit from It. The New American, 25, 32+.