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The article argues that even as the Federal Reserve has been in existence since 1913, it wasnt until the 1970s that it assumed as great a control of the American financial system as it has today.
The Federal Reserve was created in 1913 by Woodrow Wilson. In the late 19th and early 20th centuries credit was controlled entirely by private banks. Farmers in the mid-western regions grew increasingly upset by this fact, as they complained that oftentimes the banks would alter their credit options at times when the farmers were vulnerable. The Federal Reserve was created as a compromise, with the banks still controlling credit, but the government determining the supply of funds. While the intervening years have seen significant reforms in the way the Federal Reserve operates, its underlining function has remained the same. Private banks are able to borrow from the reserve at a discounted rate, they then loan this money to borrowers at the federal funds rate, or interest rate. As the Federal Reserve raises rates, so must the banks raise the rates of loans. This system is designed to ensure fair and equitable lending throughout the country. The current chairman of the Federal Reserve, who was recently reappointed in January of 2010, and Alan Greenspan and Paul Volcker preceded him.(Johnson, Web)
When the recession hit the Federal Reserve began the process of lowering interests rates to increase consumer spending. At this point, the Fed has virtually lowered the interest rate to 0%. In addition to lowering the interest rate the Fed has engaged in a number of unorthodox methods in an effort to revive the sputtering economy. “Those techniques include buying vast amounts of longer-term Treasury bonds, mortgage-backed securities issued by government-sponsored companies like Fannie Mae and Freddie Mac and commercial debt issued by private companies and consumer lenders.” (NY Times, Web) In addition to these techniques, the reserve helped in JPMorgans merger with Bear
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(“Federal Reserve Essay Example | Topics and Well Written Essays - 500 words - 1”, n.d.)
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(Federal Reserve Essay Example | Topics and Well Written Essays - 500 Words - 1)
“Federal Reserve Essay Example | Topics and Well Written Essays - 500 Words - 1”, n.d. https://studentshare.org/miscellaneous/1563299-federal-reserve.
Indeed, its confusing structure, organization, and responsibilities make it difficult for American's to understand. In explaining the Federal Reserve, the New York Times describes it as having, “exercised more influence over economic growth and the level of employment than other government entity.”
1): 1. Conducting the nation's monetary policy by influencing the monetary and credit conditions in the economy in pursuit of maximum employment, stable prices, and moderate long-term interest rates. 2. Supervising and regulating banking institutions to ensure the safety and soundness of the nation's banking and financial system and to protect the credit rights of consumers.
Over the years, the system and structure if the federal reserve has evolved to meet the effects of economic crisis and great depression in the economy. The Federal Reserve System was created under the Federal Reserve Act in order to address the issue of panic in the banking industry and acts as the final check point and regulator in the clearing system and the banking industry.
The structure, roles and the responsibilities of the Federal Reserve has undergone rapid changes over the years which have been mainly stimulated by the events like the Great Depression, Global Financial Crisis, etc. The structure of the Federal Reserve System is composed of a governing board, the open market committee, regional Federal Reserve banks, privately owned banks in US and the advisory councils.
They jointly implement the monetary policy which is set by the Federal System. Every Federal Reserve banks governs the regulation of commercial banks in their district. Alexander Hamilton, the first secretary of treasury of United States, proposed the idea of instituting a National Bank in order to develop the country in terms of all the financial aspects.
It is apparent that while the housing market is still mired in an extended slump and the number of vacant homes are increasing by the day, the economy is merely in bad, not terrible shape. The article succinctly states that the economy "is limping rather than slumping".
Similarly, an increase in the money supply increases the cost of loans and people spend less. This reduces the money supply in the economy. Similarly, when interest rates decrease the exact opposite happens and money supply in the economy increases.
1b) Open-Market Operations: In this method, the sale and purchase by central bank in the security market has desired effect on the money supply in the economy.
Monetary policy is the actions taken by the central bank to influence the availability and cost of money and credit to assist in promoting national economic goals. The Fed's monetary policy decisions affect the flow of money and credit in the economy.
The Federal Reserve System includes the Federal Open Market Committee, the Board of Governors, and the Federal Reserve Bank Presidents.
The key objectives of the monetary policy are stipulated in the Federal Reserve Act. This act asserts that the Federal open Market Committee and the Board of Governors should always strive to promote the goal of stable
It will also evaluate the policies that Federal Reserve used to fix the recession to explain why it was effective in the same. The research arguments will be derived from published articles, credible websites and datasets all for
6 Pages(1500 words)Admission/Application Essay
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