The Federal Reserve System

1
TheFederal ReserveSystem

• Chapter 11 Section 1

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Objectives

• How many people are on the Board of Governors of
  the Federal Reserve System?
• What is the Federal Reserve System (the Fed)?
• How does the check-clearing process work?

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Federal Reserve SystemFederal Reserve Act Dec.
23, 1913

• Board of Governors
• 7 members
• 14 year term
• Appointed by US president
• Approved by the Senate
• US president appoints a chairman for a 4 yr term

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• 12 Federal Reserve district banks
• 12 branch offices of the Fed
• Federal Open Market Committee
• FOMC is a 12 member policy-making group that
  conducts open market operations.
• 7 of the 12 members are on the Board of Governors

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• Who is the Chairperson of the Board of Governors?
• Dr. Ben Bernanke
• What Federal Reserve district number are we in?
• 7th
• What city?
• Chicago

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Functions of the Federal Reserve System

• 1. Control Money Supply
• 2. Supply Paper Money
• Printing by the Bureau of Engraving and Printing
  in Washington D.C.
• 3. Hold Bank Reserves
• Reserve account
• Commercial bank checking account with the Fed

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Functions of the Federal Reserve System

• 4. Provide Check-Clearing Services
• 5. Supervise Member Banks
• 6. Serve as the Lender of Last Resort
• The Fed is a last-chance bank for banks

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Check-Clearing Process

• Jeremy (Fort Wayne) sends a 1,000 check to
  Hollie in Los Angeles.
• Hollie deposits the 1,000 in her LA bank.
• Her balance increases by 1,000.
• LA bank sends the check to Fed bank in
• San Francisco.
• This increases the LA banks balance.

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• San Francisco bank sends the check to...
• Chicago.
• Chicago Fed bank contacts Jeremys local bank to
  reduce his account by 1,000.
• Therefore the local banks account is lowered at
  the Chicago Fed Reserve bank.

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Assessment

• How many people are on the Board of Governors of
  the Federal Reserve System?
• What is the Federal Reserve System (the Fed)?
• How does the check-clearing process work?