With the economy in the news every day, more attention is being focused on the
Federal Reserve than ever before. Let’s look at some of the facts, and
understand exactly what they do and how they do it.
The Federal Reserve System was created on December 23, 1913 by President Woodrow
Wilson to act as the central bank of the United States. It was created to
provide the nation with a safer, more flexible, and more stable monetary,
banking and financial system.
The Federal Reserve System is made up of twelve Federal Reserve Banks, overseen
by the Board of Governors. The Board of Governors is located in Washington DC
and is comprised of just seven members, who are appointed by the President and
confirmed by the Senate. The full term of each member of the Board of Governors
is 14 years, and the appointments are staggered such that one term expires on
each even-numbered year. This system ensures that “fresh blood” will be brought
to the Board every two years. When your term is up as a Board Governor,
you are done, and cannot be reappointed. But if a member leaves the Board before
his or her term expires, the person appointed to fill the remainder of the term
can be reappointed for another full term. The terms for the Chairman
and Vice Chairman are four years, but may be reappointed for additional
four-year terms. The current Chairman, Ben Bernanke, and Vice Chairman
Donald Kohn lead the Board of Governors.
So What Does the Fed Do on a Daily Basis?
The main responsibilities of the Fed include:
Researching US national and regional economies.
Providing financial services to depository institutions, the US government,
and foreign official institutions.
Supervising and regulating banking institutions to ensure the safety of the
nation’s financial system and protect the credit rights of consumers.
Conducting the nation’s monetary policy by influencing the monetary and credit
conditions in the economy (i.e. hiking or cutting the Fed
Funds Rate, as they did recently) in pursuit of maximum employment, stable prices, and moderate
long-term interest rates.
Communicating information about the economy via publications, speeches, seminars
and websites.
But the communication method that typically grabs the attention of most
individuals is the statement given by Federal Chairman Ben Bernanke, following
the eight formal meetings that take place about every six weeks throughout the
year. At these meetings, the Fed has the opportunity to make changes to the
Federal Funds Rate, and make their decision by reviewing economic and financial
conditions. They can also make adjustments to the Fed Funds Rate outside of
these meetings, but rarely do so because they don’t want to deliver a surprise
that could rattle the financial markets.
Overall, the Fed’s main responsibility is to keep the economy growing at a
steady pace by keeping inflation stable and rates moderate. When inflation is
low and stable, businesses and households can spend, knowing that their
purchasing power can remain strong.
David J Edwards
REALTOR
Keller Williams Realty Southeast Sound
Phone: 425-890-8045
Fax: 425-902-1899
E-Mail: david@davidjedwards.com
Website: http://www.davidjedwards.com
Blogsite: http://www.davidjedwards.com/real-estate-blog.asp
Mobile Site: http://davidjedwards.mofuse.mobi
Community Reports: http://www.topmarketer.net/CSR/CSReport.aspx?CV4GU5KAYOEF
David J Edwards is a full time real estate agent and REALTOR with Keller
Williams Realty specializing in Residential Real Estate for buyers and sellers.
