has a vote Open market operations the purchase and sale of government

Has a vote open market operations the purchase and

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has a vote -Open market operations:the purchase and sale of government securities that affect both interest rates and the amount of reserves in the banking system Member Banks -All national banks are required to be members of the FRS -Commercial banks chartered by states are not required to be members, but can join -Before 1980: it was costly to be a member of the FRB because no interest was paid on reserves deposited → cost of membership rose → more banks left the system -Decline in membership: -Lessened Fed’s control over money supply = more difficult for the Fed to conduct monetary policy -How to stop decline in Fed Membership, by reducing distinction b/w member and nonmember banks -BOG required all commercial banks to be members of FRS -All depository institutions became subject (by 1987) to the same requirements to keep deposits at the Fed: so member and nonmember banks would be equal on reserve requirements
-All depository institutions were given equal access to the FR facilities like the discount window and Fed check clearing Board of Governors of the Federal Reserve System -Head of FRS -7 members headquartered in DC -Each governor is appointed by the president and confirmed by Senate -Can serve one full 14 year term plus part of another term -With one governor’s term expiring every other January -Required to come from different FR districts -Chair of BOG is chosen from 7 governors and serves four-year term, renewable -Involved and Conducts Monetary policy by: -All 7 are members of the FOMC and vote on conduct of open market operations -Has majority of votes -Sets reserve requirements -Effectively controls the fixed amount by which the discount rate exceeds federal funds rate target -The chair of Board advises the president on economic policy, testifies in Congress, speaks on behalf of the FRS to media Federal Open Market Committee (FOMC) -Meets 8 times a year, 7 members of BOG, President of the FRB of NY & presidents of four other FRB : chair of BOG is chair of FOMC -To make decisions on the conduct of open market operations and the setting of the policy interest rate, the federal funds rate -Federal funds rate: the interest rate on overnight loans from one bank to another -They are the focal point for policymaking in the FRS because open market operations helps the Fed controlling money supply because it is where decisions about tightening of monetary policy or easing of monetary policy -can tightensmonetary policy (rise in the federal funds rate) or easesmonetary policy (lowering of the federal funds rate) -They advise on the setting of reserve requirements and discount rate Why the Chair of the Board of Governors Really Runs the Show -Spokesperson for the Fed and negotiates with Congress and president of US -Sets the agenda of Board and FOMC meetings -Supervises Board’s staff of professional economists and advisers How Independent is the Fed -Two different types of independence of central banks: -Instrument independence:the ability of the central bank to set monetary policy instruments -Goal independence:the ability of the central bank to set the goals of monetary policy

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