ECO 4935 Chapter 8
What major changes did Banking Act of 1935 bring?
-Created the FOMC -It removed the secretary of the treasury and the comptroller of the currency from the Fed's board -Ensured the newly named governors of the Fed would be removed from political pressure.
What are the responsibilities of the Bank of England?
-Financial Stability -Monetary Policy
What are the Eurozone Banks three governing bodies?
-Governing Council -General Council -Executive Board
What are the responsibilities of the ECB executive board?
-Implements monetary policy decisions made by the governing council -Manages the day-to-day operation of the bank
What is the Bank of Japan responsible for?
-Issuing bank notes -Financial Market Stability -Monetary Policy
What are the responsibilities of the ECB?
-Monetary Policy -Foreign Exchange Operations -Maintenance of Payments System -Holding and Management of Official Foreign Reserves of Euro Area Countries
What are the responsibilities of the Bank of Canada?
-Monetary Policy -Maintenance of the Financial System
What are the responsibilities of the ECB governing council?
-Monetary policy -Operations of the ECB
What are the three major areas that the Board of Governors are responsible for?
-Operations of the Fed -Commercial Bank Regulation -Monetary Policy
According to the Bank of England, what does monetary stability mean?
-Stable prices -Confidence in the British pound
What is the Federal Reserve responsible for supervising and regulating?
-State-chartered banks that are members of the Federal Reserve -Bank holding companies -Financial holding companies -Foreign branches of member banks -Edge Act and agreement corporations -The US activities of foreign banks.
What are the responsibilities of the Federal Reserve District Banks?
-The check-clearing system -Supervising and examining banks in their district -Keeping track of the economy in their respective districts
The Federal Open Market Committee is important because
-They can decide the direction of monetary policy in the U.S. -They can decide the target for the Fed funds rate -They can set the discount rate
Changes to the structure of the Fed during the Great Depression included:
-the creation of the FOMC. -the consolidation of power in the board of governors. - decreasing the political independence of the Fed.
Who currently holds the chair of Board of Governors position?
Jay Powell since 2018
Class C Federal Reserve District Bank Member
Non-bankers, but with knowledge of banking and financial services who represent the public interest are appointed by the Board of Governors in Washington. -Not allowed to hold stock of any member bank.
Reserve Bank Organization Committee
Organization that would determine which cities would receive Federal Reserve banks.
During WWII, what was the fiscal agent function of the Fed?
Responsible for issuing, servicing, and redeeming War Savings Bonds.
What was Elizabeth Warren's argument against the Consumer Financial Protection Agency" (CFPA)?
That a CFPA within the Fed would be weak and serve the interest of banks over the interest of consumers.
What did powerful New York financiers argue in terms of the Federal Reserve?
That the New York Fed should be given fully half of all of the funds being provided to the entire Federal Reserve system
Critics of the Bank of Japan argue that it played a role in the global financial crisis. What do these critics argue?
The Bank of Japan did not expand its balance sheet as much as the Federal Reserve did in response to the crisis.
The Bank of Japan Act
The Bank of Japan's autonomy regarding currency and monetary control shall be respected. -Price level stability is the main goal
How many voting members does the FOMBC have?
12 - 7 governors -5 of the twelve Federal Reserve bank presidents -Only the president of the FOMBC and four bank presidents get to vote.
How many members is the Community Depository Institutions Advisory Council made up of?
12 -Represents community banks, thrifts, and credit unions
How many bankers is the Federal Advisory Council made up of?
12 (one from each Federal District)
How many members are on the Federal Open Market Committee?
12 voting members, 19 members total
How long is the term for the Board of Governors?
14 years (non-renewable term)
When was the Bank of England founded?
1694
When was the Bank of Japan established?
1882
When was the Federal Reserve created?
1913 by the Owens- Glass Federal Reserve Act in response to the Panic of 1907
When was the Bank of Canada created?
1934
How many Federal Reserve Bank branches are there?
24
How long does a term last for the chair of Board of Governors?
4 years (renewable term)
According to the Fed's 1942 annual report, how many Federal Reserve Bank employees were involved in war bond operations?
4,000 or approximately 20% of the Fed workforce
How many members are in the Federal Reserve Board of Governors?
6 governor positions in addition to the chair
How many members does each Federal Reserve district bank have?
9 members -3 class A directors 3 class B directors -3 class C directors
What was the Federal Reserve System when it first began operations?
A collection of twelve independent regional banks whose purpose was to maintain the gold standard and be a "lender of last resort" to commercial banks.
Beige Book
A document created eight times a year by the staff of the Board of Governors of the Federal Reserve that describes the current status of business conditions and of the US economy as a whole.
Repurchase Agreement
A financial transaction where a primary dealer sells a security to the Federal Reserve with the agreement to buy it back at a set date in the future.
Officers of the Bank
A group of executives who make the day-to-day decisions.
Truth in Lending Act
An act which requires lenders to inform borrowers of all direct, indirect and true costs of credit.
What kind of reserve did J.P. Morgan want?
An all-powerful New York Fed that would rival the size and power of the central banks of Europe.
Automated Clearing House (ACH)
An electronic network for financial transactions in the U.S. The network processes batches of debits and credits to various financial institutions allowing for fast, safe and efficient transfer of funds.
When was the Insurance Policy Advisory Committee established and by whom?
By the Economic Growth, Regulation Relief and Consumer Protection Act of 2018
When was the Model Validation Council created and by whom?
By the Fed Board in 2012
When was the Community Advisory Council created and by whom?
By the Fed Board in 2015
The financial and economic system in Canada functioned very differently from financial systems in other Western countries. In what way was Canada's experience different?
Canada avoided much of the global financial crisis mainly because of well-run banks
Class B Federal Reserve District Bank Member
Cannot be an officer, director, or employee of any bank and who are to represent the public including agriculture, labor, business and consumers.
Real Bills Doctrine
Central banks should lend money to commercial banks if and only if the commercial banks use those funds to support "real" (as opposed to speculative) economic activity.
The FOMC meets to decide which of the following?
Changes to monetary policy
Class A Federal Reserve District Bank Member
Come from member banks in the district and represent the interest of member banks.
What is the Federal Reserve board responsible for writing and enforcing?
Financial market regulations toimplement many of the consumer protection laws passed by Congress
During WWI, what was the fiscal agent function of the Fed?
Handled the government's issuance of Liberty Loan bonds and Victory Notes
What is the Fed's largest asset?
Holdings of securities -Government securities -Federal agency debt -Privately issued mortgage-backed securities.
Regulation Z
Implements the Truth in Lending Act requiring credit institutions to inform borrowers of the true cost of obtaining credit.
The Federal Reserve Act of 1913
States that the Federal Reserve banks are to serve as the fiscal agents anddepositories of the US federal government
Federal Reserve
The central bank and monetary authority of the United States.
Who sits atop the Federal Reserve power pyramid? Who currently holds this position?
The chair of the Board of Governors
Federal Open Market Committee (FOMC)
The committee within the Federal Reserve that is responsible for setting monetary policy.
Depository
The idea that the public will send its variousfederal tax payments to the Fed.
Discount Rate
The interest rate the Federal Reserve charges on loans it makes to member banks. These discount loans are made at the Fed's discount window.
Who appoints the Board of Governors?
The president of the United States -Confirmed by the United States Senate
Who appoints the chair of the Board of Governors?
The president of the United States -Confirmed by the United States Senate
What are the responsibilities of the ECB general council?
Transitional issues of countries who wish to begin using the euro.
The main purpose of term auction lending was to:
increase the level of liquidity in financial markets.