VIEWS: 36 PAGES: 12 POSTED ON: 9/9/2011
Federal Reserve System Organization of Federal Reserve System • The Federal Reserve • The Federal • The Federal Reserve Banks • The member banks. • Government Macroeconomics Program • Monetary policy – Control of • The Fed – Banker for United States government – money supply • Federal Reserve Banks in United States. • Run by Board of Governors, members appointed for year terms Two Federal Reserves in Missouri: St. Louis and Kansas City 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 many • Missouri has two; California has branches Purpose • Provide a • Funded through interest on US government • 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. RATES • _________– 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 Policy • Government spending and taxation • Determined by laws passed by Congress • Budget – – excess resulting from less gov. spending – – shortage when gov. spending is higher than revenues Homework • 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 suggest. • Homework continued on next slide. 1. What are credit rates based on? What is that number today? 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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