Chapter 16
B). U.S. Treasury debt securities portfolio; U.S. federal government agency debt securities; and mortgage-backed debt securities.
For the Fed Bank's consolidated balance sheet at December 31, 2013: What were the three largest investments (assets), which reflects its methods of intervening into the financial markets? A). Reserve Repurchase Agreements; Reserve Account Deposits from Commercial Banks and Other Depository Institutions; and, Federal Reserve Notes. B). U.S. Treasury debt securities portfolio; U.S. federal government agency debt securities; and mortgage-backed debt securities. C). Commercial Banks' common stock portfolio; Equity Capital; Reserve Account Deposits from U.S. Commercial Banks and Other Depository Institutions.
C). Reserve repurchase agreements; reserve account deposits from commercial banks and other depository institutions; and, Federal Reserve Notes.
For the Fed Banks' consolidated balance sheet at December 31, 2013: What were the three largest sources of funds to finance the Fed's investments (i.e. assets)? A). Equity Capital; Reserve Account Deposits from U.S. Commercial Banks and Other Depository Institutions; Reserve Account Deposits from Foreign Commercial Banks and Other Depository Institutions. B). U.S. Treasury debt securities portfolio; U.S. government agency debt securities; and mortgage-backed debt securities. C). Reserve repurchase agreements; reserve account deposits from commercial banks and other depository institutions; and, Federal Reserve Notes.
A). They are appointed by the President of the U.S. and can serve 14 year terms, and cannot be fired for incompetence; the BOG comprises a majority of the members of the FOMC, the most powerful part of the Federal reserve system, and can thus overrule the presidents of 5 of the 12 Federal Reserve Banks.
From where do the individual members and Chairman of the Board of Governors come? In what respects is the BOG a very powerful part of the Fed? A). They are appointed by the President of the U.S. and can serve 14 year terms, and cannot be fired for incompetence; the BOG comprises a majority of the members of the FOMC, the most powerful part of the Federal reserve system, and can thus overrule the presidents of 5 of the 12 Federal Reserve Banks. B). The commercial banks which are common stockholders of the Federal Reserve System get to nominate, vote for, and elect the members of the BOG, subject only to their confirmation by the U.S. Senate; the BOG exclusively decides how much currency needs to be printed and manages that process. C). The boards of directors for each of the 12 district Federal Reserve Banks nominate, vote for, and elect the members of the BOG, subject only to their confirmation by the U.S. House of Representatives; the BOG exclusively decides what the level of the Discount Rate needs to be (i.e., the interest rate the Federal Reserve Banks charge to loan money to commercial banks).
C). It is the federal/national government authority/agency responsible for a country's monetary policy (which is a policy to manage a country's money supply and interest rates).
How can a central bank be defined in general? How can "monetary policy" be defined? A). It is the agency of the executive branch of the national government which is controlled by the political party of the U.S. President, and is responsible for the President's economic policy development and implementation. B). It is a bank controlled by the U.S. Congress which is responsible to develop and implement economic policies for the entire country on a bipartisan basis. C). It is the federal/national government authority/agency responsible for a country's monetary policy (which is a policy to manage a country's money supply and interest rates).
C). The presidents of 5 of the 12 Fed banks serve on the very powerful FOMC from time to time; all 12 presidents can attend the FOMC meetings; each of the 12 Fed Banks employ economists who continuously conduct economic research that can be influential for monetary policy employed by the Fed.
How do each of the 12 district Federal Reserve Banks exercise influence in the Federal Reserve System's overall governance? A). The 12 district Fed Banks are the part of the Federal Reserve System which make all of the most important decisions regarding monetary policy for the U.S. economy. B). The 12 district Fed Banks cannot exercise any significant influence in the governance of the the Federal Reserve System because their exclusive role is to print and distribute paper currency and serve as a clearinghouse for processing paper-based checks. C). The presidents of 5 of the 12 Fed banks serve on the very powerful FOMC from time to time; all 12 presidents can attend the FOMC meetings; each of the 12 Fed Banks employ economists who continuously conduct economic research that can be influential for monetary policy employed by the Fed.
B). High employment; economic growth; price stability; interest rate stability; financial market stability; and foreign exchange rate stability.
What are the six major goals of a government's monetary/economic policy? A). High employment; promote economic growth for all of the country's strategic industries; ensure no commercial bank fails; ensure stock prices do not fall significantly; develop income tax policy for the federal government; promote economic growth and high employment for less-developed countries. B). High employment; economic growth; price stability; interest rate stability; financial market stability; and foreign exchange rate stability.
B). A "member" bank is a commercial bank which is a common stockholder for one of the 12 Federal Reserve Banks for its district and thereby can vote for the 6 of the 9 members of the board of directors; all nationally-chartered commercial banks must be members of the Fed and state-chartered banks are permitted but not required to be members; the president of a Federal Reserve Bank gets to be a member of the powerful FOMC from time to time on a rotating basis; member banks can influence which commercial banks in their district can get help from the Federal Reserve Bank.
What is a "member bank" of the Fed, and how do they exercise influence in the Fed? A). A "member" bank is a depository institution which is required to maintain a reserve deposit balance at its district Federal Reserve Bank. B). A "member" bank is a commercial bank which is a common stockholder for one of the 12 Federal Reserve Banks for its district and thereby can vote for the 6 of the 9 members of the board of directors; all nationally-chartered commercial banks must be members of the Fed and state-chartered banks are permitted but not required to be members; the president of a Federal Reserve Bank gets to be a member of the powerful FOMC from time to time on a rotating basis; member banks can influence which commercial banks in their district can get help from the Federal Reserve Bank. B). A "member" bank is one of the 5 Federal Reserve Banks that has its president sit as a member of the FOMC, the most powerful part of the Federal Reserve System.
A). It is financially independent; it is operationally independent: it can develop/set specific monetary policy goals and it can develop/exercise monetary policy tools/programs (i.e., instruments) independently; and it is politically independent because its leaders are not elected by the voting public or subject to re-election.
What is meant by "independence" of the Fed (i.e., the three or four specific ways the Fed is independent), and why is "independence" considered a good thing? A). It is financially independent; it is operationally independent: it can develop/set specific monetary policy goals and it can develop/exercise monetary policy tools/programs (i.e., instruments) independently; and it is politically independent because its leaders are not elected by the voting public or subject to re-election. B). It is operationally independent: it can develop/set specific monetary policy goals; it is good because it would be operationally infeasible for any other group to be involved in this basic functional responsibility; it is not financially independent, nor politically independent. C). It is only financially independent as its total income comes from its investment in government securities, which far exceeds its operational expenses; it is not independent in any other respect.
B). Federal Open Market Committee, comprised of the 7 members of the Board of Governors and 5 of the Federal Reserve Bank presidents; its 12 members make all of the important monetary policy decisions regarding the level and growth rate for the money supply as well as establish targets for key interest rates in the economy, and these things impact all sectors of the economy.
What is the FOMC and what are its powers? A). Financial Oversight Management Corporation, comprised of the 7 members of the Board of Governors and all 12 presidents of the district Federal Reserve Banks; its 19 members make all the important monetary policy decisions regarding the growth rate for the national economy as well as the unemployment rate. B). Federal Open Market Committee, comprised of the 7 members of the Board of Governors and 5 of the Federal Reserve Bank presidents; its 12 members make all of the important monetary policy decisions regarding the level and growth rate for the money supply as well as establish targets for key interest rates in the economy, and these things impact all sectors of the economy. C). Federal Overseers of the Monetary Composites, which is a subsidiary of the Federal Deposit Insurance Corporation; the FOMC insures the reserve deposit balances for the member banks of the Federal Reserve.
A). Board of Governors (7 persons appointed by the POTUS for 14 year terms; 12 Federal Reserve Banks for 12 separate geographical districts in the U.S.; the common stock of the 12 Federal Reserve Banks are separately owned by the nationally-chartered commercial banks (and state-chartered banks at their option) and each has a board of directors that cannot be dominated by commercial banks or the Board of Governors; the 12 Federal Reserve Banks operate independently from each other and serve a limited geographic area; only the Board of Governors is headquartered in Washington, D.C.; the entire Fed is an independent (financially, operationally, politically) agency of the U.S. federal government; the U.S. Congress created the Fed through legislation and can change the powers of the Fed through additional legislation.
What is the basic structure of the Fed, what are the checks and balances inherent in its structure, and why was/is there a need for such checks and balances? A). Board of Governors (7 persons appointed by the POTUS for 14 year terms; 12 Federal Reserve Banks for 12 separate geographical districts in the U.S.; the common stock of the 12 Federal Reserve Banks are separately owned by the nationally-chartered commercial banks (and state-chartered banks at their option) and each has a board of directors that cannot be dominated by commercial banks or the Board of Governors; the 12 Federal Reserve Banks operate independently from each other and serve a limited geographic area; only the Board of Governors is headquartered in Washington, D.C.; the entire Fed is an independent (financially, operationally, politically) agency of the U.S. federal government; the U.S. Congress created the Fed through legislation and can change the powers of the Fed through additional legislation. B). The Federal Reserve Bank is headquartered in Washington, DC and its common stock is owned by the 10 largest banks in the U.S., most of which are headquartered in New York City, the nation's financial capital; 1/3 of the board of directors is chosen by these commercial banks, 1/3 of the board is chosen by the U.S. Senate, and 1/3 is chosen by the President of the U.S., all for 6 year terms; the Fed's board of directors are all required to be professional economists who have extensive commercial banking experience and are required to have previously serve in the U.S. Congress for at least 6 years.
B). 1913; before the 20th century American business, financial, and political leaders as well as the American public were more fearful/distrustful of centralized political and economic/financial power; during the Financial Panic of 1907 a lot of commercial banks failed and depositors lost money, and this was a culmination of a series of significant economic recessions which had occurred since the end of the Civil War (1865), such that the American people were ready to create a central bank to help prevent significant economic recessions/depressions and bank failures.
When was the U.S. Federal Reserve System created, and what were some of the factors behind the fact that the U.S. did not have an effective central bank for so long into its history? A). 1863; during the Civil War, the federal government needed a central bank to manage the country's money supply and to raise funds to pay for the war against the Confederate States in rebellion. B). 1913; before the 20th century American business, financial, and political leaders as well as the American public were more fearful/distrustful of centralized political and economic/financial power; during the Financial Panic of 1907 a lot of commercial banks failed and depositors lost money, and this was a culmination of a series of significant economic recessions which had occurred since the end of the Civil War (1865), such that the American people were ready to create a central bank to help prevent significant economic recessions/depressions and bank failures. C). 1787; at the end of the Revolutionary War and as part of the U.S. Constitution, a central bank was created to manage the nation's money supply and provide federal government support for the commercial banking industry.
C). Dr. Janet Yellen is the current Chairperson, and Dr. Benjamin Bernanke preceded her; they are professional economists with strong academic credentials; the research staff is comprised primarily of a few hundred professional economists; it is one of the most important institutions working to improve the U.S. economy's performance.
Who have been the last two Chairpersons of the Board of Governors and what are their credentials? What is the "research staff" of the Fed, and what do these facts say about the role of the Fed in the U.S. A). Dr. Benjamin Bernanke is the current Chairman, and Dr. Alan Greenspan preceded him; they are professional economists with strong academic credentials; the research staff is comprised of financial engineers who build and maintain financial models to simulate financial market conditions; provide oversight and stability for the financial markets. B). Bryan Moynihan is current Chairman, and Jamie Dimon preceded him; they are professional commercial bankers with many years of financial institution management experience; the research staff is comprised of professional credit analysts; provide oversight and stability to the commercial banking industry. C). Dr. Janet Yellen is the current Chairperson, and Dr. Benjamin Bernanke preceded her; they are professional economists with strong academic credentials; the research staff is comprised primarily of a few hundred professional economists; it is one of the most important institutions working to improve the U.S. economy's performance.
B). Because the Board of Governors and the FOMC is an unelected group that cannot be fired for incompetence (they can only be publicly humiliated or impeached if they commit a crime), and Americans believe in representative democracy and performance accountability.
Why do some consider "independence" of the Fed a bad thing? A). Because they represent an extreme fringe on the political spectrum (far right as well as far left wings) and both wings have a high distrust of elite bureaucracies. B). Because the Board of Governors and the FOMC is an unelected group that cannot be fired for incompetence (they can only be publicly humiliated or impeached if they commit a crime), and Americans believe in representative democracy and performance accountability. C). Because the leaders of the Federal Reserve System need to consult with a wide range of business and financial market leaders in order to make the best monetary policy decisions.
