Monetary Policy 1. Discount Rate 2. Reserve Ratio 3. Bonds NEW 4. (NEW) [TAF]Term Auction Facility Janet Yellen Chairman of the Federal Reserve

Philadelphia 3 San Francisco 12 1 Boston 4 Cleveland 9 Minneapolis 11 Dallas Washington, D.C. (Board of Governors) 10 Kansas City 7 Chicago 5 Richmond 2 New York Atlanta 6 St. Louis 8 A. Boston B. New York C. Philly D. Cleveland E. Richland F. Atlanta G. Chicago H. St. Louis I. Minneapolis J. Kansas City K. Dallas L. San Francisco

7 th -G-Chicago (1) 8 th -H-St. Louis (3) 9 th - I -Minneapolis (1) 10 th -J-Kansas City (3) 11 th -K-Dallas (3) 12 th -L-San F rancisco (4) 1st-A-Boston (0) 2 nd -B-New York (1) 3 rd -C-P hiladelphia (0) 4 th -D-Cleveland (2) 5 th -E-Richmond (2) 6 th -F-Atlanta (5)

Quasi-Public Banks. [in combo] private ownershippublic Blend of [private ownership (corporations) but public control (government) control] 12 banks The 12 banks are instruments of the government but not over5,000 banks owned by the government. The over 5,000 banks in the $1 per share) 12 districts buy stock ($1 per share) in their district bank 6% dividends (& get 6% dividends [no capital gains]) so the banks are owned by citizens privately owned. Serving the public, it is owned by citizens. corporation owned by the banks The 12 banks are a corporation owned by the banks in their districtspublicGagency in their districts, but a public (G) agency directly responsible to Congress. $30 billion They might make $30 billion in one year and turn 90% of that over to the Treasury 90% of that over to the Treasury. T he Fed ’s 25 B ranches T he Fed ’s 25 B ranchesFed

Richard Fisher Richard Fisher - President of Dallas Fed. Majored in economics/ Harvard member of FOMC

Four Part Structure of the Fed Seven Board of Governors Seven Board of Governors  most important body of the Fed  appointed by the President  appointed by the President and confirmed by the Senate  14-year termsstaggered  14-year terms are staggered one replaced each two years (one replaced each two years) they arepaid $162,100 [they are paid $162,100]  isolation from political pressure (only one 14 year term) Chairmanserves onlyfour years  the Chairman serves only four years but can be reappointed4-year renewable term4 times reappointed [4-year renewable term] 4 times pay is $180,100  His pay is $180,100.  E very president appoint at  E very president gets to appoint at least twoClinton appointed 8 least two. Clinton appointed 8 & Bush appointed 41 st 2 years & Bush appointed 4 in 1 st 2 years.  One term begins every 2 years on Feb. 1 of even numbered years.

First Board of Governors, 1914

Janet Yellen Chair – term ends 2024 Daniel K Tarullo Unexpired term to 2022 Lael Brainard Unexpired term to 2026 Stanley Fisher Unexpired term to 2020 Vice Chair There are currently 5 members of the FED. There are 2 vacancies Jerome H. Powell Term ends 2028

Federal Open Market Committee [FOMC] 2. Federal Open Market Committee [FOMC] main policy-making arm -Fed ’s main policy-making arm Board of Governors -includes 7 Board of Governors, NY Fed President [who is vice chairman, and is the second chairman, and is the second most important in the system most important in the system The 4 other bank presidents The 4 other bank presidents rotateother 11 rotate among the other 11 every 3 years. every 3 years. other 7 bank presidents are -other 7 bank presidents are non-voting members non-voting members meet every six weeks -they meet every six weeks

The FOMC Meeting Room in Washington DC The FOMC Meeting Room in Washington DC 27-foot oval mahogany table The FOMC meets around a 27-foot oval mahogany table in a room 23-foot ceiling1,000-pound chandelier with a 23-foot ceiling with a 1,000-pound chandelier. Home of 7 Board of Governors

Typical Meeting The entire committee [12 members + other 8 bank presidents] examine regional, national and international economic info to assess the strengths and weaknesses of the economy. After discussing the economy, the voting members vote on the direction of monetary policy. A policy directive describes the committee’s assessment of the economy and the new target fed funds rate. announcement1:15 p.m.An announcement is made about 1:15 p.m..

7 th -G-Chicago (1) 8 th -H-St. Louis (3) 9 th - I -Minneapolis (1) 10 th -J-Kansas City (3) 11 th -K-Dallas (3) 12 th -L-San F rancisco (4) 1st-A-Boston (0) 2 nd -B-New York (1) 3 rd -C-P hiladelphia (0) 4 th -D-Cleveland (2) 5 th -E-Richmond (2) 6 th -F-Atlanta (5) 3. Twelve Fed Banks and 25 Branches 4. Thousands of Member Banks

Destroy/Issue paper notes The Fed clears 40%; The Fed clears 40%; Banks clear rest electronically.

Cash Services Check Processing Electronic Payments

 Store cash and coin  Maintain currency’s quality  Detect counterfeits

The Fed handled 42 billion electronic transactions in 2006

The End