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Banking & Fin - Ch 5
Banking & Finance - Ch 5 Federal Reserve System
| Question | Answer |
|---|---|
| The organization that oversees a nation's monetary system | Central Bank |
| The first secretary of the Treasury that advocated and developed the first central bank, believing it would make the coutnry stronger | Alexander Hamilton |
| Charter in 1791, 8 branches, Charter Expired, Thomas Jefferson voiced opionions of Rural interest - "The power was taken away from the state and put in the hands of eastern bankers" | First Central Bank |
| Congress saw a need, chartered in 1816, 25 branches, Farmers and South strongly opposed | Second Central Bank |
| States tried to undermine the authority, lead to Supreme Court Challenge, Court ruled creation of Central Bank is within the Power of Congress | McCulloch V. Maryland (1816) |
| Campaigned to do away with bank stating it is 'Unamerican', elected as president and ordered all government funds to be withdrawn, in 1836 vetoed the bill to renew charter | Andrew Jackson |
| 1837-1863 All bank functions were handled by the states, Federal funds were held in the US Treasury | Era of Free Banking |
| Created by the National Currency Act of 1863, created a uniform national currency and a system of banks, still charges and supervises national banks | Office of the Comptroller of Currency (OCC) |
| Inteded to be used as currency and promise immediate payment by the bank that issued the note, Each note backed by a government bond, Notes issued by state banks charged 10% tax, cuased most state banks to seek national charters | Bank Notes |
| A widespread worry that banks do not have enough money to cover customer demands for withdrawals (Usually started with a run on a single bank) | Bank Panic |
| Occurs when depositors fear their money is not safe in the bank in which it is deposited, depositors arrive in great numbers at the same time to withdraw their money | Bank Run |
| IN 1913 Woodrow Wilson signed the Federal Reserve Act, Development was affected by events and failures of the two previous central banks | The Federal Reserve System |
| The mechanism a nation uses to provide and manage money for itself | Monetary System |
| Occurs when a central authority shares power with regional and local authorities | Decentralization |
| 1. Federal Reserve System A. Board of Governors B. Federal Open Market Committee C. District Banks | Organization of the Federal Reserve |
| The governing body of the Federal Reserve System | Board of Governors |
| 7 Members, appoionted by the US President and confirmed by the Senate, 5 members serve 14 year terms, Chairpersona nd Vice-Chairperson serve 4 year terms, Each district can have only one member | Board of Governors Members |
| Longest serving Fed chair | Alan Greenspan (1987 - 2006) |
| Current Fed Chair | Ben Bernanke (Appointed by George W Bush) |
| 12 total members, President of Federal Reserve Bank of New York is always a member and all 7 of the BOG, remainign 4 are chosen from the presidents of the other 11 reserve banks | Federal Open Market Committee members |
| Meets 8 times a year to make key decisions about the US monetary policy | Federal Open Market Committee |
| Establish the nation's monetary policy, supervise and regulate banking institutions, provide financial services to depository insitutions in the US Government, Maintain the stability of the Financial System | 4 Primary Funcitons of the Federal Reserve |
| The regualtions of a country's money supply to achieve economic goals and stability (Controls interest rates charged for loans and the amount reserve banks must maintain) | Monetary Policy |
| Open Market Operations, Discount Rate, Reserve Requirements | Three Basic tools used by the BOG and FOMC to conduct monetary policy |
| FMOC supervises purchase and sale of long-term loans issued by the government to raise money | Open Market Operations |
| The interest banks pay to borrow money from a Federal Reserve Rate, Reset every two weeks - BOG approves | Discount Rate |
| Dictated by the Fed, the amount banks are required to keep, Impacts money supply | Reserve Requirements |
| All national banks and some state charged banks are members of the Fed, Fed issues regulations that affect member banks business and supervises its member banks to evaluate soundness | Bank Regulation and Supervision |
| Collecting and paying funds when two member banks use check to transfer funds between them, transferring funds almost immediately, offering customer service such as depositing payroll, holding reserves | Financial Services the Fed provides to Member Banks |
| Holds all of the checkign accounts owned by the US government, monitors the value of the dollar, negotiating skills, buys and sells the dollar | Financial Services the Fed provides the US Government |
| Fed charges fees to member banks to cover their own fees, if any money is left the Fed gives the money to the US Treasury where it is applied to US National Debt | Financial Services Fees |
| Supervises every aspect of our bank's activities, monitors the economy, supervieses and regulates member banks, serves as the nation's bank | The Fed has helped establish the stability of the US Financial System |
Created by:
mryan396
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