Federal Reserve System Federal Reserve System Organization of Federal Reserve System

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					Federal Reserve
    Organization of Federal
       Reserve System

•   The Federal Reserve
•   The Federal
•   The Federal Reserve Banks
•   The member banks.
    Macroeconomics Program
• Monetary policy
    – Control of
• The Fed
    – Banker for United States government
    –             money supply
•   Federal Reserve Banks in United
• Run by Board of Governors, members
  appointed for      year terms
Two Federal Reserves in
Missouri: St. Louis and Kansas
               Fed Facts
• Created by
    –       - Independent entity – keep politics out
•              is the head of the
 Fed – reports to Congress annually

•                  must belong

• Board of Governors and Fed. Banks subject to
• Missouri has two; California has branches
• Provide a
• Funded through interest on US
• Regulation of
  – Market operations
  – Buying and selling of US facilities
  – Federal securities
      Board of Governors
  – 7 members
  – appointed by President - year terms
  – Meets 10 -12 times a year
• Reviews economic conditions
  – Inflation, unemployment, credit defaults,
    construction starts
• Sets policy for growth of
     The Federal Open Market
         Committee (FOMC),
    Open market operations are the buying and
  selling of government securities, the
  principal tool of US national monetary policy.
• The Committee sets          by specifying the
  short-term target levels for the federal
  funds rate (the rate that commercial banks
  charge on overnight loans among themselves).
• The FOMC also directs operations in foreign
  exchange markets,
    – the U.S. Treasury has responsibility for
      formulating U.S. policies regarding the exchange
      value of the dollar.
• _________– benchmark used by
  institutions for setting interest (credit)
  rates (4.5% 11/29)
• __________ – overnight rate charged
  by FED for available funds (reserve)
• __________ – Interest rate an eligible
  depository institution is charged to
  borrow funds
• __________ – money that member
  banks must have on account in the Fed
  at the close of business – used to
  control inflation
• Government spending and taxation
• Determined by laws passed by Congress
• Budget
  –       – excess resulting from less gov.
  –        – shortage when gov. spending is
    higher than revenues
• Today new credit regulations have taken effect.
  The purpose of these changes is to make it easier
  for people to understand credit and to hopefully
  not get into credit debt.
• The Federal Reserve Bank offers a very good
  guide to the new credit policies:
• http://www.federalreserve.gov/creditcard/#
• Watch the PSA and make a list of the tips they
•   Homework continued on next slide.
1.   What are credit rates based on? What is that number
2.   If you are late with a payment your APR will change for
     how long?
3.   New fees are allowed as stated in number 7 – list them
     and explain how they interact with your credit limit.
4.   What is a balance transfer? A foreign transaction?
5.   Penalty fees are different than transaction fees and are
     tiered. What does this mean?
6.   How are penalty rates applied to your card?
7.   A big change to credit is that anyone under 21 now needs
     a cosigner in order to get a credit card. Is this a good or
     bad idea? Give three examples of each.
8.   Research the new changes to credit by printing out an
     article from a reputable source that deals with this topic.
     Summarize the article and then write your response to
     what you have read.

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