ECONOMICS SEPTEMBER 18, 2014

THE FEDERAL RESERVE AND MONETARY POLICY

BELLRINGER: TURN TO PAGE 472 AND WITHIN YOUR GROUPS, STUDY THE PHOTOGRAPH AND READ THE CAPTION. DESCRIBE WHAT THE PHOTOGRAPH SHOWS. MAKE A LIST OF WHAT YOU THINK. WE WILL DEVELOP ON THE BOARD.

STANDARDS: E.42 Analyze how the Federal Reserve uses monetary tools to promote price stability, full employment, and economic growth.

E.53 Describe the organization and functions of the Federal Reserve System and identify

the current Federal Reserve chairperson.

OBJECTIVES: STUDENTS WILL EXAMINE THE PURPOSE AND DUTIES OF A CENTRAL BANK, IDENTIFY THE FEATURES OF THE FEDERAL RESERVE SYSTEM, AND EXPLAIN THE STRUCTURE OF THE FEDERAL RESERVE SYSTEM.

TODAY’S NOTES

  1. Creating the FED
  1. Federal Reserve Act of 1913 established the Federal Reserve.
  2. Created a central bank for the United States.
  3. The Federal Reserve System is the central bank of the United States.
  4. The FED wants to do two things:
  1. Lower unemployment
  2. Keep inflation down
  1. Duties of a central bank
  1. What are bank reserves
  1. Bank have to hold and not lend a percentage of all deposits. Depending on the size of the bank, this percentage will vary.
  2. As of October 12, 2012, the Fed required that all banks with more than $79.5 million on deposit maintain of a reserve of 10% of deposits. Banks with less than $79.5 million, but more than $12.4 million, must reserve 3% of all deposits. Banks with less than $12.4 million in deposits have a zero percent reserve requirement.
  3. TraditonsFirst 10%.
  4. Regions Bank 10%
  5. Heritage Bank 10%
  1. Holding reserves
  1. The Fed holds this money and helps control the money supply.
  1. Assuring stability two things that happen:
  1. Regulate and supervise banks to make sure they act in ways to serve the interest of depositors. (give example of this regulation bank in Alamo and Jackson Tn)
  2. Control the way money is issued. This happens through the 12 district banks.
  1. Lending money
  1. Only to banks and not individuals.
  1. Duties of the FED (standard E53)

1. Provides banking services for both private banks and the national government.

a. helps finance war

b. helped in the terrorist attack in 2001. Issued 45 billion in loans to banks across the nation to ensure little disruption to the banking industry.

c. Fed also distributes currency (coin and paper money)

D. The structure of the FED (standard E 53)

1. Board of Governors

a. 7 members appointed by the president to a 14 year term.

b. approved by congress

c. Board members terms expire every two years.

d. President chooses the chairman and vice chairmen who serve 4 year terms.

e. Past three chairman were:

1. Alan Greenspan (1987-2006)

2. Ben Bernekie (2006-2014)

3. Janet Yellen (2014)

2. 12 District banks

1. Boston

2. New York

3. Philadephia

4. Cleveland

5. Richmond

6. Atlanta

7. Chicago

8. St. Louis

9. Minneapois

10. Kansas City

11. Dallas

12. San Francisco

3. Member banks

a. all nationally chartered banks

b. any state chartered bank who wants to join

CLOSING QUESTIONS

a. Why did Congress pass the Federal Reserve Act of 1913?

b. Why is the Federal Reserve called the bankers’ bank?

c. What is the role of the Board of Governors in the Federal Reserve?

d. How do member banks provide funding for the FED?

e. How does the 14 year term of members of the Board of Governors help make the Fed an independent government agency?

ANY QUESTIONS