Financial Institutions

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 government 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.

The FOMC, Federal Open Market Committee, is a group made up of the 7 Board of Governors, the President of the New York Reserve Bank, and 4 other Reserve bank presidents who switch with other Reserve Bank’s on one year terms. Together these members meet and vote on the policies in which they believe they should enact given the current and predicted future state of the economy.

The Federal Reserve increases its reserves by issuing loans to a commercial banking system. This allows the bank that is borrowing reserves to disburse credits to the public. The Federal Reserve Banks offer primary credit, secondary credit, and seasonal credit, to bank organizations each with its own interest rate. Depending on if the Fed wants to decrease or increase the interest rate can be a positive or negative effect to the public. If the rate is decreases it encourages banking organizations to get more loans. When this is done the banks acquire more funds and are able to disburse more loans the people.

The bank rate is the interest rate at which the Bank of Canada stands ready to lend reserves to chartered banks. The banker 's deposit rate is the interest rate that the Bank of Canada pays banks on their deposits at the Bank of Canada. Changes to these rates by the Bank of Canada typically spread to other interest rates and therefore will influence the amount of lending done by the banks.

15. What is the primary role of the Federal Reserve? What is the significance of this role?

The Federal Reserve plays a vital role as the intermediary in clearing and settling interbank payments to assure that the millions of transactions performed each day are processed safely and efficiently. Acting as the “Banker’s Bank”, the Federal Reserve Banks provide various services to the nation’s banks such as check processing, electronic transfers, and ensuring there is enough cash in circulation to meet public demand. As fiscal agent for the U.S. government, the Reserve Banks pay Treasury checks and issue, transfer, and redeem U.S. government

By law, the Federal Reserve conducts monetary policy to achieve its macroeconomic objectives of stable prices and maximum employment. The Federal Open Market Committee usually conducts policy by adjusting the level of short-term interest rates in response to changes in the outlook of the economy. Since 2008, the FOMC has also used large-scale purchases of Treasury securities and securities that were guaranteed or issued by federal agencies as a policy tool in an effort to lower longer-term interest rates and thereby improve financial conditions and so support the economic recovery (What).

The Federal Reserve Board is a regulating body that determines how United States will lend money by coordinating the banks and defining the value of the dollar. A Governor on the Federal Reserve board communicates with the twelve region 's bank presidents, economic analysts, and their regional directors, and collectively define the dollar by selling long-term and short-term bonds that advance a percentage of the worth. Once an agreement has been made upon fraction percentage, banks are required to maintain that stated amount in a Federal Reserve vault, or the bank’s vault. The Federal Reserve loans temporary funds to the banks that do not meet the reserve requirement in the form of a short term loan, usually overnight. A large amount of the Federal Reserve Board’s time is spent discussing fractions of a percent on specific money-related rates which steers the economy.

The Federal Reserve System has three branches: the Board of Governors, The Federal Open Market Committee, and Reserve Banks. The Federal Reserve System (Fed) supplies and regulates America’s money to all the banks. The Board of Governors is the main authority of the three branches of the Fed, and it supervises other banks. The Federal Open Market Committee is the most prominent policymaker of the three branches and regulates the supply of money in the economy. Federal Reserve Banks serve other banks, this is why they are called banker’s banks. There are twelve Federal Reserve Banks which represent different states and these “districts” share data for monetary policies. The future role of monetary policy is vital

In the 1930s the Federal Reserve act was amended to create the Federal Open Market Committee (FOMC), consisting of the seven members of the Board of Governors and five representatives from the Federal Reserve Banks. The FOMC meets at minimum four times a year and has the power to direct all open market operations of the Federal Reserve banks.

One of the responsibilities or purpose of the Fed, is to creating the nation’s monetary policy by persuading money and credit conditions in the economy to gain full employment and stable prices. Another job the Fed had was watching and instructing banks, and other important financial institutions. To make

The Federal Reserve has three tools to help maintain and make changes within money supply and policies. The first tool and most popular tool is open market operations. The Reserve uses this instrument to regulate the rate of federal funds within the system, which is merely the rate in which banks borrow reserves from other banks. With this tool, they can alter the interest rates and amount of money on the open market. Therefore, the Reserve can essentially control the total money stream, whether that is expanding and contracting it.

United States Federal Reserve system, also known as Federal Reserve or simply “Fed” is the United States central banking system. The Federal Reserve took inception in 1913, after the adoption of the Federal Reserve Act. The United States Congress has mandated three macroeconomic objectives to the Federal Reserve. These are minimum levels of unemployment, prices stability and keeping in check the rates of interests. Over the years, the role of Federal Reserve has expanded. It now formulates the country’s monetary policies, conducts supervision and regulation of the banking institutions, maintenance of the financial

Over the past few years we have realized the impact that the Federal Government has on our economy, yet we never knew enough about the subject to understand why. While taking this Economics course it has brought so many things to our attention, especially since we see inflation, gas prices, unemployment and interest rates on the rise. It has given us a better understanding of the effect of the Government on the economy, the stock market, the interest rates, etc. Since the Federal Government has such a control over our Economy, we decided to tackle the subject of the Federal Reserve System and try to get a better understanding of the history, the structure, and the monetary policy of the power that it holds.

Discount rate. The discount rate is defined by the Federal Reserve as, “ how much the United States central bank charges its member banks to borrow from its discount window to maintain the reserve it requires” (www.federalreserve.org). If for example, the discount rate is set low, banks will be more likely to borrow from the central bank and increase the reserves. With increased reserves the federal funds rate will also decrease, which in turn will indirectly effect all other aspects of the economy. The reverse is true as well, if the discount rate is set high, the banks will borrow monies from one another rather than from the Federal Reserve.