Federal Reserve Act

Examples of Federal Reserve Act in the following topics:

• The Federal Reserve Act

  • President Wilson secured passage of the Federal Reserve Act in late 1913.
  • President Wilson secured passage of the Federal Reserve Act in late 1913, as an attempt to carve out a middle ground between conservative Republicans, led by Senator Nelson W.
  • The final Federal Reserve Act passed in December 1913, and most bankers criticized the plan for giving too much financial control to Washington, while liberal reformers claimed that it allowed bankers to maintain too much power.
  • Wilson named Paul Warburg and other prominent bankers to direct the Federal Reserve.
  • Despite the fact that the Act intended to diminish the influence of the New York banks, the New York branch continued to dominate the Federal Reserve until the New Deal reorganized and strengthened the Federal Reserve in the 1930s.

• Introduction to the Federal Reserve

  • The Federal Reserve System (also known as the Federal Reserve, or the "Fed") is the central banking system of the United States.
  • It was created on December 23, 1913 with the enactment of the Federal Reserve Act, largely in response to a series of financial panics.
  • Congress established three key objectives for monetary policy—maximum employment, stable prices, and moderate long-term interest rates—in the Federal Reserve Act.
  • When the general price level is rising too fast, the Federal Reserve acts to slow economic expansion by reducing the money supply, thus raising short-term interest rates.
  • Describe the primary function and objectives of the Federal Reserve System

• The Changing Federal Role in the Economy

  • In the United States, the Federal Reserve System (also known as the Federal Reserve, and informally as the Fed) serves as the central mechanism for understanding federal intervention (and de-entanglement) with the economy.
  • The central banking system of the United States, the Fed was created on December 23, 1913, with the enactment of the Federal Reserve Act.
  • The Congress established three key objectives for monetary policy—maximum employment, stable prices, and moderate long-term interest rates—in the Federal Reserve Act.
  • The Federal Reserve System acts as the central mechanism for federal intervention in the U.S. economy.
  • Explain the role and the historical origins of the Federal Reserve System in the early 20th century

• The Creation of the Federal Reserve

  • The Federal Reserve was created to promote financial stability, provide regulation and banking services, and conduct monetary policy.
  • The US suffered through a number of financial crises that eventually drove Congress to create the US central bank, the Federal Reserve (the Fed), through the Federal Reserve Act of 1913.
  • The Act established three key objectives for monetary policy: maximum employment, stable prices, and moderate long-term interest rates.
  • The first two objectives are sometimes referred to as the Federal Reserve's dual mandate and are the most emphasized of the three.
  • This proportion is called the reserve requirement and is controlled by the Fed.

• Wilsonian Progressivism

  • Included among these were the Federal Reserve Act, Federal Trade Commission Act, the Clayton Antitrust Act, and the Federal Farm Loan Act.
  • Wilson's banking reform was most notably accomplished by the 1913 creation of the Federal Reserve System.
  • President Wilson secured passage of the Federal Reserve Act in late 1913, as an attempt to carve out a middle ground between conservative Republicans, led by Senator Nelson W.
  • Wilson named Paul Warburg and other prominent bankers to direct the Federal Reserve.
  • Despite the fact that the Act intended to diminish the influence of the New York banks, the New York branch continued to dominate the Federal Reserve until the New Deal reorganized and strengthened the Federal Reserve in the 1930s.

• Structure of the Federal Reserve

  • The Federal Reserve (the Fed) was designed to be independent of the Congress and the government.
  • The Federal Open Market Committee (FOMC), composed of the seven members of the Federal Reserve Board and five of the 12 Federal Reserve Bank presidents, which oversees open market operations, the principal tool of U.S. monetary policy.
  • Twelve regional Federal Reserve Banks located in major cities throughout the nation, which divide the nation into twelve Federal Reserve districts.
  • The Federal Reserve Banks act as fiscal agents for the U.S.
  • Recall the structure of the Federal Reserve System of the United States

• The Lender of Last Resort

  • Federal Reserve as the "lender of last resort" extends credit to financial institutions unable to obtain credit elsewhere.
  • In the United States, the Federal Reserve serves as the lender of last resort to those institutions that cannot obtain credit elsewhere and the collapse of which would have serious implications for the economy.
  • According to the Federal Reserve Bank of Minneapolis, "the Federal Reserve has the authority and financial resources to act as 'lender of last resort' by extending credit to depository institutions or to other entities in unusual circumstances involving a national or regional emergency, where failure to obtain credit would have a severe adverse impact on the economy. " Through its discount and credit operations, Reserve Banks provide liquidity to banks to meet short-term needs stemming from seasonal fluctuations in deposits or unexpected withdrawals.
  • For example, on September 16, 2008, the Federal Reserve Board authorized an $85 billion loan to stave off the bankruptcy of international insurance giant American International Group (AIG).
  • Explain why the Federal Reserve serves as the "lender of last resort"

• The Reserve Ratio

  • The reserve ratio is the percentage of deposits that a bank is required to hold in reserves, or funds that are not allowed to be loaned.
  • The required reserve ratio is a tool in monetary policy, given that changes in the reserve ratio directly impact the amount of loanable funds available .
  • For example, a reserve ratio of 20% will result in 80% of any given initial deposit being loaned out and if the process of loaning is assumed to continue, the maximum increase in money expansion specific to an initial deposit at a 20% reserve ratio will be equal to the reserve multiplier 1/(reserve ratio) x the initial deposit.
  • The conventional view in economic theory is that a reserve requirement can act as a tool of monetary policy.
  • The Federal Reserve is charged with maintaining sustainable economic growth.

• The Reserve Requirement

  • The Federal Reserve is in charge of setting reserve requirements for all depository institutions in the country.
  • The Federal Reserve can adjust reserve requirements by changing required reserve ratios, the liabilities to which the ratios apply, or both.
  • Nonetheless, reserve requirements play a useful role in the conduct of open market operations by helping to ensure a predictable demand for Federal Reserve balances and thus enhancing the Federal Reserve's control over the federal funds rate.
  • Requiring depository institutions to hold a certain fraction of their deposits in reserve, either as cash in their vaults or as non-interest-bearing balances at the Federal Reserve, does impose a cost on the private sector.
  • Unless it is accompanied by an increase in the supply of Federal Reserve balances, an increase in reserve requirements (through an increase in the required reserve ratio, for example) reduces excess reserves, induces a contraction in bank credit and deposit levels, and raises interest rates.

• Bernanke Era

  • The Bernanke Era has included challenges faced by the Federal Reserve such as the financial crisis, strengthening federal policy, and reducing the deficit.
  • Ben Bernanke is an American economist and chairman of the Federal Reserve (the Fed) through January 2014.
  • Ben Bernanke gave a speech in 2002, before he became chairman of the Federal Reserve.
  • As a result, he did not continue to make public statements about the direction of the Federal Reserve.
  • They stated that act of averting worse problems outweighed any responsibility that he had for the financial crisis.