Presentation on theme: "What is it? & What does it do?"— Presentation transcript:
1 What is it? & What does it do? The Federal ReserveWhat is it?&What does it do?
2 The Federal Reserve National Bank The Banker’s Bank The Government’s BankThe Fed
3 The Federal ReserveThere were several prior attempts to create a “National Bank” but none of them really succeededThe “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 1913.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 Governors7 membersServe 14 year termsCannot serve consecutive termsAll from different regionsPresident nominates membership and Senate approvesPresident appoints the chair of the Board and Senate confirms
6 Structure of the Federal Reserve Federal Reserve Banks:Twelve District BanksMore than one state in each district
7 Functions of the Federal Reserve Four Primary FunctionsServe the GovernmentServe BanksRegulate Banking SystemRegulate the Money Supply
8 Serving the Government Acts as the bank for the U.S. government.Acts as agent for the U.S. TreasuryBuys, Sells and Auctions: bonds, bills and securitiesIssues CurrencyExchanges new bills for old ones
9 Serving Banks Clears Checks Supervising Lending Practices Ensures full disclosureLender of Last ResortLends to banks whenthey need itDiscount Rate: theinterest rate theychargeIt’s a high rate
10 Regulates the Banking System Monitors the Reserves each bank holdsPeriodically Examines BanksCan 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