Chapter+12+Structure+of+Central+Banks+and+the+Federal+Reserve+System

Chapter 12 Structure - Chapter 12 Structure of Central Banks and the Federal Reserve System Origins of the Federal Reserve System Structure of the

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System - Origins of the Federal Reserve System - Structure of the Federal Reserve System - Federal Reserve Banks - Member Banks - Board of Governors of the Federal Reserve System - Chairman of the Board of Governors - Federal Open Market Committee (FOMC) - How Independent Is the Fed? - Should the Fed Be Independent? Motivation : Central banks’ actions affect interest rates, the amount of credit, and the money supply, all of which have direct impacts not only on financial markets, but also on aggregate output and inflation. Who controls central banks and determines their actions? What motivates their behavior? Who holds the reins of power? Origins of the Federal Reserve System Before the twentieth century, a major characteristic of American politics was the fear of centralized power. 1. American resistance to the establishment of a central bank. 2. Another source was the traditional American distrust of moneyed interests The termination of the Second Bank’s national charter in 1836 created a severe problem for American financial markets ==> no lender of last resort to avert a bank panic. Hence in the nineteenth and early twentieth century, nationwide bank panics became a regular event, occurring every twenty years or so, culminating in the panic of 1907. The 1907 panic resulted in such widespread bank failures and such substantial losses to depositors that the public was finally convinced that a central bank was needed to prevent future panics. = Fed was setup in 1913.
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This document was uploaded on 10/28/2011 for the course 220 301 at Rutgers.

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Chapter 12 Structure - Chapter 12 Structure of Central Banks and the Federal Reserve System Origins of the Federal Reserve System Structure of the

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