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The Federal Reserve What is it? & What does it do?

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Presentation on theme: "The Federal Reserve What is it? & What does it do?"— Presentation transcript:

1 The Federal Reserve What is it? & What does it do?

2 The Federal Reserve National Bank The Bankers Bank The Governments Bank The Fed

3 The Federal Reserve There were several prior attempts to create a National Bank but none of them really succeeded The Panic of 1907 was a series of banking problems that convinced the government we needed a federal bank. The finished product was the Federal Reserve. Finally created six years later in Reformed several times was the last.

4 Structure of the Federal Reserve Board of Governors (7) Federal Reserve Banks (12) Member Banks (4,000) Other Depository Institutions (25,000)

5 Structure of the Federal Reserve Board of Governors 7 members Serve 14 year terms Cannot serve consecutive terms All from different regions President nominates membership and Senate approves President appoints the chair of the Board and Senate confirms

6 Structure of the Federal Reserve Federal Reserve Banks: - Twelve District Banks - More than one state in each district

7 Functions of the Federal Reserve Four Primary Functions 1. Serve the Government 2. Serve Banks 3. Regulate Banking System 4. Regulate the Money Supply

8 Serving the Government Acts as the bank for the U.S. government. Acts as agent for the U.S. Treasury Buys, Sells and Auctions: bonds, bills and securities Issues Currency Exchanges new bills for old ones

9 Serving Banks Clears Checks Supervising Lending Practices Ensures full disclosure Lender of Last Resort Lends to banks when they need it Discount Rate: the interest rate they charge Its a high rate

10 Regulates the Banking System Monitors the Reserves each bank holds Periodically Examines Banks Can classify a bank as a problem bank and give it more frequent examinations

11 Regulates the Money Supply Reduces money supply when necessary to keep inflation down. Increases money supply to match growth in demand


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