Organization of Federal
• The Federal Reserve
• The Federal
• The Federal Reserve Banks
• The member banks.
• 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
• 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,
• Sets policy for growth of
The Federal Open Market
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
– 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
• __________ – money that member
banks must have on account in the Fed
at the close of business – used to
• Government spending and taxation
• Determined by laws passed by Congress
– – 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:
• 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
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.