Chapter 12 outline

Chapter 12 outline - Chapter12: System I II a a.i...

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Chapter 12: Structure of the Central Banks and the Federal Reserve  System I. Origins of the Federal Reserve System a. First Bank of the United States a.i. Disbanded in 1811 b. Second Bank of the United States b.i. Renewal vetoed in 1832 by Andrew Jackson b.ii. Expired in 1836 c. Panic of 1907 c.i. Widespread bank failures and substantial loss to depositors c.ii. Convinced public of need for central bank- no lender of last resort d. Federal Reserve Act of 1913 d.i. Checks and balances d.ii. Created Federal Reserve System II. Structure of the Federal Reserve System a. 12 Federal Reserve Banks a.i. Each regional district has 1 main bank a.ii. 3 largest:  New York , Chicago, San Francisco a.iii. Quasi-public (part private, part government) a.iv. Member banks required to purchase stock in main district bank- dividends  limited to  6%  annually a.v. Involvement in Monetary Policy     : a.v.1. “establish” discount rate a.v.2. Decide which banks get discount loans a.v.3. Directors select one banker to serve on Advisory Council a.v.4. 5 of 12 presidents get vote in FOMC Functions     : Clear checks Issue new currency Withdraw damaged currency Discount loans Mergers and applications Liaisons to business communities Collect data on bus. Conditions Research a.vii. Directors     : a.vii.1. 6 elected by member banks (A – professional bankers; B –  prominent industry, agriculture, labor, consumer leaders) a.vii.2. 3 appointed by Board of governors (C – not allowed to be  officers, stockholders, employees of banks) a.vii.3. President of the Bank appointed by directors b. Board of Governors of the Federal Reserve System b.i. 7 members  appointed by the president of the U.S.
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b.ii. 1 full nonrenewable  14 year  term, plus part of another b.iii. Chairman of the Board:  4 year, renewable  term b.iv. Actively involved in monetary policy b.v. All are members of the FOMC Functions: Sets reserve requirements Controls discount rate Foreign negotiations Economic analysis Set maximum interest rates payable on deposits under  Regulation Q until 1986 Credit Control Act of 1969- ability to regulate credit Sets margin requirements
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Chapter 12 outline - Chapter12: System I II a a.i...

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