CHAPTER%2012 - Origins Structure Fed Independent? ECB Other...

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Unformatted text preview: Origins Structure Fed Independent? ECB Other Foreign CBs CHAPTER 12 Structure of Central Banks and the Federal Reserve System Origins Structure Fed Independent? ECB Other Foreign CBs Origins of the Federal Reserve System Resistance to establishment of a central bank Fear of centralized power Distrust of moneyed interests First U.S. experiments with a central bank terminated in 1811 and in 1836 No lender of last resort Nationwide bank panics on a regular basis Panic of 1907 so severe that the public was convinced a central bank was needed Federal Reserve Act of 1913 created an elaborate system of checks and balances Origins Structure Fed Independent? ECB Other Foreign CBs Origins of the Federal Reserve System The Federal Reserve System Aimed at diffusing power along regional lines between private sector and government among bankers, business and the public Entities: Federal Reserve Banks (12) Board of Governors of the Federal Reserve System Federal Open Market Committee Federal Advisory Council 2800 Member Banks Origins Structure Fed Independent? ECB Other Foreign CBs Origins Structure Fed Independent? ECB Other Foreign CBs Origins Structure Fed Independent? ECB Other Foreign CBs Federal Reserve Banks Atlanta Boston Chicago Cleveland Dallas Kansas City Minneapolis New York Richmond San Francisco Philadelphia St.Louis Origins Structure Fed Independent? ECB Other Foreign CBs Federal Reserve Banks Quasi-public institution owned by private commercial banks in the district that are members of the Fed system Member banks elect six directors for each district; three more are appointed by the Board of Governors Designed to reflect all constituencies of the public Three A directors are professional bankers Three B directors are prominent leaders from industry, labor, agriculture, or consumer sector Three C directors appointed by the Board of Governors represent the general public (no officers, employees, or stockholders of banks) Nine directors appoint the president of the bank subject to approval by Board of Governors Origins Structure Fed Independent? ECB Other Foreign CBs Functions of the Federal Reserve Banks 1. Clear checks 2. Issue new currency 3. Withdraw damaged currency from circulation 4. Administer and make discount loans to banks in their districts 5. Evaluate proposed mergers and applications for banks to expand their activities 6. Act as liaisons between the business community and the Federal Reserve System 7. Examine bank holding companies and state-chartered member banks 8. Collect data on local business conditions 9. Use staffs of professional economists to research topics related to the conduct of monetary policy Origins Structure Fed Independent? ECB Other Foreign CBs Federal Reserve Banks and Monetary Policy Directors establish the discount rate Decide which banks can obtain discount loans Directors select one commercial banker from each district to serve on the Federal Advisory Council which consults with the Board of Governors and provides information to help conduct...
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This note was uploaded on 10/08/2008 for the course ECON 3310 taught by Professor Davis during the Fall '07 term at Cornell University (Engineering School).

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CHAPTER%2012 - Origins Structure Fed Independent? ECB Other...

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