The Federal Reserve

Lizzie Hoven 1b

History of the Fed

During the late 1700's, the first money was printed in the US, it was printed to finance the war. Throughout the 1800's Congress had established the first two banks. In the late 1800's, the National Banking Act was passed which established banks, and required the currency given by them to be protected by government facilities. During 1913, President Wilson signed the Federal Reserve Act, which established the Fed. Then during the mid and late 1900's the Stock Market had crashed, causing the 1933 Banking Act (FDIC). The Federal Reserve was their third try at a successful bank, and is still present today.

The Fed's Goals and Responsibilities

The number one goal of the Fed is to keep the economy in balance, but there are some others things they keep in check to balance everything out. They help to clear checks , supervise banks, and supply money. They serve as a bank to banks, meaning they are supplying the money to commercial banks, which then distribute money to us.

Board of Governors

The Board of Governors plays a huge role in keeping the Monetary Policy in check. There are seven members on the board, all seven of these members are appointed by the president. They serve fourteen year terms where a new term starts every two years. There's one chairperson who can be considered the "president" of the board, the current chairperson today is Janet Yellen. She is also the first women to be chairperson on the board. The board supervises the Federal Reserve Banks and conducts the Monetary Policy.

The FOMC and Monetary Policy Tools

The FOMC stands for the Federal Open Market Committee. They meet about 6-8 times in a year to discuss monetary policy. There are 12 members on the board, and these people are the only one who are allowed to vote. Seven of the members are all seven of the Board of Governors, they are automatically on the committee. The president of the New York District Bank also has an automatic spot on the committee because they know a lot about the stock market and can bring that to the meetings. The other four are four districts banks that rotate every now and then.


The monetary policy tools are important to keeping the economy in check. One of the tools used is Open Market Operations which is buying and selling of government bonds to either expand or decrease the amount of money in the banking system. Another tool is Discount Rate, or the interest rate that is charged to commercial banks and can sometimes change few times a year. One more tool is Reserve Requirement which is the amount of money banks are supposed to have on hand, and is most of the time held in cash.

Money/Currency

Before the Federal Reserve, there was around 30,000 different currencies that were being used in the United States, and almost everyone had their own currency if they wanted to use their own. Some currencies were even worth more than others, so this caused problems with the economy because it started to fluctuate and go from one extreme to the next. Sometimes banks didn't have enough money to issue out to their customers. So now we have the Federal Reserve System to keep everything in check and the economy under control.

Reserve Banks

In 1913, the 12 district banks were strategically placed all over the United States, they have never been moved since. One banks is placed in every one of the 12 Federal Reserve districts. There are more banks on the east coast because when they were placing them, more people lived there than the west coast. They then decided to put more on the eats coast. Their job is to supply banks with money, so then we have money, they are also in charge of clearing checks. The 12 banks are located in Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas, and San Francisco.

BEP

BEP stands for the US Bureau of Engraving and Printing. The BEP produces the US currency notes. They are also in charge of operating the nation's central bank and ensures that a certain amount of currency and coin is circulating in the US. We have the BEP today mainly because before 1913 there was no specific currency for everyone. You could walk to a different town and not be able to buy anything because they had a different type of currency than you had. There was no balance in currency, so they needed something that would regulate the production of money so everyone would be able to buy things in different towns and states.

U.S Mint

The US Mint has several facilities around the US, they are all in charge of producing coins for the US. The Mint was created because many people of the US were used to using coins that were issued by their state bank, and they needed to produce the same coins for every state bank to keep things in check and organized.