Federal Reserve NotesStructure & Functions

I. Purpose: to keep the economy stable

Goals: high employment, stable prices, economic growth

Enemies: inflation and unemployment (recession)

II. Structure A. publicly (gov’t) run but privately owned

bank; independent within the government

B. run by a 7 member Board of Governors appointed by the President 14 year terms – to remain apolitical one member is chosen as chairman – term

of 4 years. The current chair = Janet Yellen.

II. Structure (cont.) C. 12 Federal District Banks – U.S. is divided

up into 12 geographic regions each with its own main bank and president to manage that region; Federal Reserve Districts and Banks

D. Federal Open Market Committee (FOMC) – 12 members advise the Board of Governors on buying and selling gov’t bonds (a.k.a. securities)

III. Functions

A. Control the Money Supply – our ability to get money to consume/invest

FED

BANKS

ALL OF

US

III. Functions (cont.) B. Supply Paper Money – determines

amount to print C. Hold Bank Reserves – keep the

money banks send to their district bank to back up their checking accounts

III. Functions (cont.) D. Check Clearing Services – handles

transfer of money between banks

III. Functions (cont.) E. Supervise Member

Banks – examine banks to see that they are being run properly

F. Lender of Last Resort – bank for banks to get loans from

IV. Usage of the Fed Bank

only a bank for other banks and gov’ts; not a bank for individuals or businesses

Jobs – control $ supply & supervise banks