Essay about Federal Reserve Bank - 1233 Words

Federal Reserve Bank Introduction Federal Reserve System, commonly referred to as Fed, was established in 1913. This was after American congress passed the Federal Reserve Act in December the same year, establishing a new set of institutions which were meant to govern the relationship between banks, the government, and the production of money (Broz 1997 p. 1). The Federal Reserve System divides the nation in 12 districts, each with its own federal reserve bank (Boyes Melvin, 2006). Overall administrative structure of the system consists of: Board of Governors. The board is headed by a chairman who is appointed by the president to a four year term (Boyes Melvin, 2006). The chairman serves as a leader and also as a spokesperson for†¦show more content†¦This role is achieved through the implantation of the monetary policies. According to Arnold (2008), Fed has several tools at it disposal that it uses in the monetary polices. These are; the open market operations which involve buying and selling U.S governmen t securities in the financial markets. Further the bank is charged with the responsibility of determining the required reserve ratio. This ratio is given to the commercial banks dictating the minimum amounts that they should hold in to their accounts as deposits and for lending. Finally the Fed sets the discount rates putting in to consideration the overall market rates s well as desired effect on borrowing that the Fed seeks to achieve. In addition to these three major roles, as a bank, the Federal Reserve Bank can play the roles played by the commercial banks as the rules are not entirely prohibitive as far as this duty is concerned. Apart from the main function of monetary policy formulation and implementation, Arnold (2008), also gives other functions of the Federal Reserve System which include supplying the economy with paper money (Federal Reserve notes) in addition to serving as the lender of last resort. Being the last means that when other banks, especially the commercial banks, suffer from cash management or liquidityShow MoreRelatedThe State Of The Federal Bank Reserve1368 Words   |  6 Pagesthey loved money so much. Where did money come from? Who created money? Who controls it? Money come the federal bank reserve known as the FED. The government has control of the federal bank reserve. I think we have an amazing government that can give away and take back. Without a great government, it would chaotic everywhere. How does our government influence the economy? 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The system was created on December 1913 during the reign of President Woodrow Wilson. It was during this time that President Woodrow signed the Federal Reserve Act, incorporating it into the law. The Congress was behind the creation of the Federal Reserve with the ultimate goal of making it safer and more reliable to keep the money. The Congress was also compelled to establishingRead MoreThe Workings And Structure Of The Federal Reserve Banks Of Usa1507 Words   |  7 Pagesfurthermore consists of the Federal Reserve System, foreign banks, commercial banks, offshore banks, credit unions and saving institutions. Financial markets consist of debt and money markets, equities markets and futures and options markets. Lastly, nonbank financial institutions consist of asset-based finance companies, commercial lending companies and insurance companies. This paper is an endeavor to understand the workings an d structure of the Federal Reserve Banks of USA. Founded by the U.SRead MoreThe Federal Reserve : An American Version Of A Central Bank1093 Words   |  5 PagesThe Federal Reserve is well known for its role in setting the nation’s monetary policy which influences the money and credit conditions in an effort to promote the goals of maximum employment, stable prices, viable growth, and low inflation. It is the job of the Federal Reserve to ensure there is enough money and credit that encourages economic growth but not excess money that would cause the currency to lose its value. The Federal Reserve assesses labor and market conditions, inflation pressures