Essay On The Federal Reserve System
The Federal Reserve System, though it has many different functions was established to serve the public's interest. The Federal Reserve has three vital sectors that help in its day to day function: the Board of Governors, the Reserve Banks, and the Federal Open Market Committee (FOMC). “The Master said: “Learning without thinking is useless. Thinking without learning is dangerous”’ (Confucius The Analects pg. 7). The Board of Governors is ran by seven member or “governors” that oversees the all operations of the Federal Reserve and its goals and responsibilities given by the Federal Reserve Act. Five of the seven members has one 14 year term that are staggered so that one term expires every even numbered year.The other two are the President and Vice President of the Board of Governors, they have a four year term but may serve an additional four year term if reappointed. The only
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part of this that is related to politics is that the President nominates the governors and their position is confirmed with the U.S. Senate (Board of Governors of the Federal Reserve System).
“Terms are staggered to provide the [Federal Reserve System] political independence as a central bank, ensuring that one president cannot take advantage of his power to appoint Governors by "stacking the deck" with those who favor his policies” (In Plain English: Making Sense of the Federal Reserve). There are 12 Federal Reserve Banks in the United States operating in their own geographical area. Each of the Reserve Banks gathers important information about the businesses and needs of local communities in its area.
The Reserve Banks are they to carry out the core functions of the Federal Reserve by keeping state member banks in check, lending to depository institutions--banks, thrifts, and credit unions; providing financial services, and checking up on certain financial institutions.(“Each Reserve Bank has its own board of directors, which oversees the Bank’s activities.
These directors contribute local business experience, community involvement, and leadership and reflect the diverse interests of each District. Each board had nine members. Six of the directors are elected by member commercial banks. Three of the directors are appointed by the Board of Governors. From among these three, the Board of Governors selects a chairman and a deputy chairman of the given Bank’s board.”) (“The Federal Reserve Banks also act as fiscal agents of the U.S. government and certain other entities. In other words, they acts as the “government's bank” and maintain the U.S. Treasury’s operating cash account; pay Treasury checks and process electronic payments; and issue, transfer, and redeem U.S. government
securities.”)
Though the Federal Reserve Banks exist because of an act of Congress they are not a part of the federal government (In Plain English: Making Sense of the Federal Reserve).
The Federal Open Market Committee (FOMC) is made up of twelve voting members, the seven Governors from the Board of Governors; the president of the New York Reserve Bank; and on a rotating basis four of the eleven remaining Reserve Bank presidents. The FOMC oversees “open market operations” the tool in which sets national monetary policy. Monetary policy is the Federal Reserve’s actions to achieve goals set forth by Congress: maximum employment, stable prices, and moderate long-term interest rates. By the end of each meeting the FOMC makes decisions regarding the federal funds rate, which influences monetary and credit conditions, aggregate demand, and the whole economy. “The U.S.and global economies are complex and evolving, and changes in monetary policy take time to affect economic activities, employment,and inflation” (Board of Governors of the Federal Reserve System).
(“The FOMC typically meets eight times a year in Washington, D.C. If economic conditions require additional meetings, the FOMC can and does meet more often.”)
“The term “open market” means that the [Federal Reserve System] doesn’t decide on its own the securities dealers with which it will do business. Instead, various securities dealers compete on the basis of price in the government securities market. The FOMC sets a target for the federal funds interest rate and attempts to hit the target by buying or selling government securities” (In Plain English: Making Sense of the Federal Reserve).
(“As conditions in the economy change, the Committee adjust monetary policy accordingly, typically by raising or lowering its target for the federal funds rate.”)
“At its meetings, the FOMC considers three key questions: how is the U.S. economy likely to evolve in the near and medium term, what is the appropriate monetary policy settings to help move the economy over the medium term to the FOMC’s goal of 2 percent inflation and maximum employment, and how can the FOMC effectively communicate its expectations for the economy and its policy decisions to the public” (Board of Governors of the Federal Reserve System).
“The Master said: “The wise man is informed in what is right. The inferior man is informed in what will pay”’ (Confucius The Analects pg. 19).
“The Master said: “Artful speech and an ingratiating demeanour rarely accompany virtue”’ (Confucius The Analects pg. 1).
“Once when Fan Ch’ih asked about virtue, the Master said: ‘In private life be courteous, in handling public business be serious, with all men be conscientious. Even though you go among barbarians, you may not relinquish these virtues’” (Confucius The Analects pg. 77).
“The Master said: ‘The men of the South have a saying: “A man without constancy will make neither a soothsayer nor a doctor.” How well put! The I Ching says: “If a man be inconstant in his moral character, some one will bring disgrace upon him.”’ The Master remarked: ‘All because he did not think well beforehand’ (Confucius The Analects pg. 77-78).
part of this that is related to politics is that the President nominates the governors and their position is confirmed with the U.S. Senate (Board of Governors of the Federal Reserve System).
“Terms are staggered to provide the [Federal Reserve System] political independence as a central bank, ensuring that one president cannot take advantage of his power to appoint Governors by "stacking the deck" with those who favor his policies” (In Plain English: Making Sense of the Federal Reserve). There are 12 Federal Reserve Banks in the United States operating in their own geographical area. Each of the Reserve Banks gathers important information about the businesses and needs of local communities in its area.
The Reserve Banks are they to carry out the core functions of the Federal Reserve by keeping state member banks in check, lending to depository institutions--banks, thrifts, and credit unions; providing financial services, and checking up on certain financial institutions.(“Each Reserve Bank has its own board of directors, which oversees the Bank’s activities.
These directors contribute local business experience, community involvement, and leadership and reflect the diverse interests of each District. Each board had nine members. Six of the directors are elected by member commercial banks. Three of the directors are appointed by the Board of Governors. From among these three, the Board of Governors selects a chairman and a deputy chairman of the given Bank’s board.”) (“The Federal Reserve Banks also act as fiscal agents of the U.S. government and certain other entities. In other words, they acts as the “government's bank” and maintain the U.S. Treasury’s operating cash account; pay Treasury checks and process electronic payments; and issue, transfer, and redeem U.S. government
securities.”)
Though the Federal Reserve Banks exist because of an act of Congress they are not a part of the federal government (In Plain English: Making Sense of the Federal Reserve).
The Federal Open Market Committee (FOMC) is made up of twelve voting members, the seven Governors from the Board of Governors; the president of the New York Reserve Bank; and on a rotating basis four of the eleven remaining Reserve Bank presidents. The FOMC oversees “open market operations” the tool in which sets national monetary policy. Monetary policy is the Federal Reserve’s actions to achieve goals set forth by Congress: maximum employment, stable prices, and moderate long-term interest rates. By the end of each meeting the FOMC makes decisions regarding the federal funds rate, which influences monetary and credit conditions, aggregate demand, and the whole economy. “The U.S.and global economies are complex and evolving, and changes in monetary policy take time to affect economic activities, employment,and inflation” (Board of Governors of the Federal Reserve System).
(“The FOMC typically meets eight times a year in Washington, D.C. If economic conditions require additional meetings, the FOMC can and does meet more often.”)
“The term “open market” means that the [Federal Reserve System] doesn’t decide on its own the securities dealers with which it will do business. Instead, various securities dealers compete on the basis of price in the government securities market. The FOMC sets a target for the federal funds interest rate and attempts to hit the target by buying or selling government securities” (In Plain English: Making Sense of the Federal Reserve).
(“As conditions in the economy change, the Committee adjust monetary policy accordingly, typically by raising or lowering its target for the federal funds rate.”)
“At its meetings, the FOMC considers three key questions: how is the U.S. economy likely to evolve in the near and medium term, what is the appropriate monetary policy settings to help move the economy over the medium term to the FOMC’s goal of 2 percent inflation and maximum employment, and how can the FOMC effectively communicate its expectations for the economy and its policy decisions to the public” (Board of Governors of the Federal Reserve System).
“The Master said: “The wise man is informed in what is right. The inferior man is informed in what will pay”’ (Confucius The Analects pg. 19).
“The Master said: “Artful speech and an ingratiating demeanour rarely accompany virtue”’ (Confucius The Analects pg. 1).
“Once when Fan Ch’ih asked about virtue, the Master said: ‘In private life be courteous, in handling public business be serious, with all men be conscientious. Even though you go among barbarians, you may not relinquish these virtues’” (Confucius The Analects pg. 77).
“The Master said: ‘The men of the South have a saying: “A man without constancy will make neither a soothsayer nor a doctor.” How well put! The I Ching says: “If a man be inconstant in his moral character, some one will bring disgrace upon him.”’ The Master remarked: ‘All because he did not think well beforehand’ (Confucius The Analects pg. 77-78).