The Federal Reserve

The Federal ReserveCivics Part 2Unit 3 Lesson 9 Stefanee Sybo

HistoryThe first 2 central banks failed because people were not comfortable with a bank that powerful and because it was a threat to American libertiesAfter the 2nd central bank failed, a lot of free banks were growing, and they would issue their own notesAfter a panic in 1907, changes in banking needed to occurIn response to the panic, the national Monetary Commission was established to find a solution to all the banking and financial problems With the help of a team of advisers, in December 1913, President Woodrow Wilson signed the Federal Reserve Act into lawThe Federal Reserve Act called for 12 regional reserve banks and a board made up of 7 public officials. The Federal Reserve was born!

Pictured is the original 7 members of the Federal Reserve Board. On the far left sitting is Charles Hamlin, the 1st Chairman of the Fed.Organization and StructureThe Board of Governors You already heard of the 7 members of the Federal Reserve Board. They are appointed by the president, but have to be confirmed by the Senate. They serve 14 year terms that are staggered.

Federal Open Market CommitteeThere are 12 members that consist of the 7 members of the board and 5 (out of 12) reserve bank presidents. They conduct the monetary policy. Federal Reserve Banks12 Federal Reserve Banks and 25 branches make up this system. The banks store currency, process payments, supervise commercial banks, handle Treasury's payments, and researches economic issues.Member BanksThere are thousands of member banks. All national banks are member banks, along with some state-chartered banks (if they meet requirements). They are also stockholders of the Reserve Bank for their district.

The Fed and the Monetary PolicyThe monetary policy is what the Federal Reserve does to help control the amount of money and credit in the United States economy. Both of these things affect interest rates and how well the US economy does. The goal of the policy is to have maximum employment, stable prices, and moderate long term interest rates. If there are stable prices, there will be economic growth and maximum employment.

The Fed and the Monetary PolicyContinuedThe Fed uses 3 instruments for the monetary policy: open market operations, the discount rate, and lastly, reserve requirements.

Open Market OperationsOpen market means that the Fed and securities dealers that it does business with, competes on the basis of price. The operations for this deals with the selling and buying of government securities. The Discount RateThis deals with the Fed and interest rates that are charged by them to depository institutions for short-term loans.Reserve Requirements This means that banks must maintain a certain amount of deposits on deposit at a Federal Reserve Bank or in their vaultsWorks Citedhttps://www.federalreserveeducation.org/about-the-fed/historyhttp://content.time.com/time/photogallery/0,29307,1947516_2012438,00.htmlhttps://www.federalreserveeducation.org/about-the-fed/structure-and-functions/http://upload.wikimedia.org/wikipedia/commons/thumb/1/1e/FederalReserve_System.png/425px-FederalReserve_System.pnghttps://www.federalreserveeducation.org/about-the-fed/structure-and-functions/monetary-policy/