chapter 13 Flashcards
origins of Fed establishment
resentence to establishment, fear of centralized power
no lender of last resort
Fed Reserve Act of 1913 to elaborate a system of checks and balances
2 unique features of Fed
decentralized central bank w/ 12 regional banks
quasi-public, part private part gov owned
How many FRBs
12
How many member commercial banks
2900
3 largest FRBs
NYC, SF, Chicago
NYC makes up 25% assets
50% all together
What does the Board of Governers set, review and determine?
Reserve requirements
discount rate
what does the FOMC direct and advise?
directs OMOs
advises Reserve requirements and discount rate
What do the 12 FRBs establish?
discount rates
Who owns each FRB?
private commercial banks in the district
these member banks hold stock in the district FRB and receive dividends, but cannot trade shares
How many directors does each FRB have?
compositon?
9
3 professional bankers
3 prominent leaders from industry, labor, agriculture, or consumer
Three are not allowed to be officers, employees, or stockholders of banks
who appoints the president of each FRB?
all directors except class A (pro bankers)
who establishes discount rate from FRBs?
directors
who decides which banks can obtain discount loans from FRBs?
the FRB as a whole
How many of the 12 bank presidents have vote in FOMC?
only 5
functions of FRBs
clear checks
issue new currency
withdraw damaged currency
administer and make discount loans to
district member banks
evaluate M&A
role of NYC FRB
involvement in forex and OMO
houses desks for open markets and forex
3 most important officials in Fed
chair of BOG
vice-chair of BOG
pres of NYC FRB
who are member banks?
All national banks
commercial banks chartered by states may choose
How long are BOG terms?
14 yr, non renewable
Jow long are chairman terms
4 yr, renewable
How often does FOMC meet
8/yr
every 6 weeks
who does the FOMC consist of?
7 members of BOG
pres of FRB NYC
Pres of 4 other FRBs
who is chairman of FOMC?
chairman of BOG
Fed case for independence
more political pressures could impose bias on monetary policy
democratic politicians are short-sighted with campaigning issues
case against Fed independence
undemocratic to have monetary policy controlled by elite group
public holds president and congress responsible for economic well-being, but not fed
monetary and fiscal policy should be aligned
Fed has not used freedom successfully
diff between european system of central banks and Fed
countries control their own budgets, ECB has lower power than board of governors
monetary operations conducted by each country, not centralized
ECB does not supervise and regulate financial inst
