intro to business, banks

the current fed chairmen is

Jerome powell (appointed by president trump)

savings

a safe way to hold money: no risk to the principle lower interest, lower rate of return short or medium term money

CD (certificate of deposit)

a type of savings account locking your money in for a certain period of time grace period is 6 days or a week an account where you can get higher interest a CD is a type of account where your deposit money and you gain interest but the bank is willing to give you a higher rate of interest a time specific account (when you open up a CD its for a variable amount of time) whatever the the CD is your money is locked in when a CD is coming due it is called maturing roll over and renew- extend the time has a beginning and ending date when the CD matures if you do nothing it will automatically roll over it depends on the bank there is interest restrictions depends on the bank for a 6 month CD 1% for a 12 month CD 1.5-2% are considered a type of savings accounts they are insured by the type of bank they are in

MMA (money market account)

is in the middle another type of savings account middle ground pays more interest than a savings less interest than a CD is a safe place to put your money where you get higher interest than a savings but lower interest than a CD gets interest limited multiple deposits and withdrawals average interest rate is .08% getting your money is the same as a savings account limited number of transactions and minimum balance requirements the middle ground between a CD and savings your money is not as free as a savings but not as locked up as a CD another option or alternative minutes number of accesses limited balances keep certain balance or get less interest or a penalty the purpose is an in-between minimum balance requirements penalties if you go against those requirements access to your money is the same as a savings account

interest checking

is like a checking account except it pays you interest earns interest a checking account that earns interest multiple withdrawals and deposits same as a checking .04% for average interest restrictions minimum balance requirements overstep on those restrictions you get fees be weary of fees no limits on withdrawals and deposits

purposes of the fed

many purposes they are the bank of the United States government they help set the country's monetary policy oversee and create policies that banks have to follow

the fed regulates the nations monetary policy with 3 goals

maximum employment stable prices moderate (control) long term interest rates the fed supervises and regulates banking institutions to ensure the safety and soundness of the nation's banking system

long term money

money in excess of 2 years (can be placed in higher risk- higher reward investments)

why is deposit insurance important?

the result of FDIC is that people feel safe and comfortable depositing money in an FDIC insured bank if people didn't' put money into the bank, banks could not help the economy grow

agencies

these agencies protect us against bank failures, bankrupt banks, and financially troubled banks

how banks make money

they make money off your deposits and invest it banks take your money and make loans charge you fees for everything, although they provide you services

investment banks

financial institutions that give investment advice to their customers in addition to depositing money, customers can also buy and sell stocks using in their "brokerage" accounts with the investment bank goods and services are geared towards investors about making investments huge billion dollar corporations where people put their money and open an account where you take out your money where you are investing investors insured by SIPC

backed by the

full faith and credit of the United States government

1929-1933 the Great Depression

in October, 1929, the stock market crashed and the nation fell into its worst depression ever there were runs on banks (people panicking and withdrawing all their money from the bank) nearly 10,000 banks had failed and many people los their entire life savings this led president FDR and congress to pass the banking act of 1933

banks are more geared towards

individuals, businesses, or investing

the main functions of a bank

to provide you with a safe place to keep and protect your money and other valuables (birth certificates, jewelry, other important documents) help boost the economy by making loans to consumers and other businesses because of competition, banks will you to keep your money in their bank (interest) the amount of interest they pay varies depending on the bank and what type of account you have

types of banks

today, as a result of changes in the banking regulations, most banks offer the same services and benefits as banks from the other categories the lines have blurred between the categories of banks, where the categories do not have much meaning anymore banks are more geared towards individuals, businesses, or investing

12 federal reserve districts

under the federal reserve system, the United States is divided into 12

the fed's discount rate

the rate that the federal reserve charges depository institutions that borrows funds from it (2.0%)

FDIC

federal deposit insurance corp ($250,000) per depositor, per bank savings bank savings and loans commercial banks

our money now is

fiat money

rules are called

field of membership

savings and loans banks

accept deposits from their customers and pay them interest in return make their money by investing those deposits in higher interest investments by giving loans to customers (at a higher interest rate than they pay depositors) primary type of customer- individuals, families, and small businesses

savings banks (aka thrifts)

accept deposits from their customers and pay them interest in return make their money by investing those deposits in higher interest investments small, local neighborhood banks friendly primary type of customer- families and individuals

federal reserve system

aka the fed the central bank of the United States bank of the United States government set the country's monetary policy (interest rates, ...etc) the fed is overseen by a board of governors (located in Washington DC) is also a bank to other banks

the banking act of 1933

also known as the glass- steal act FDR recalled all gold and silver certificates, effectively ending gold or other metal standard established the federal deposit insurance corp (FDIC)

bank

an institution that deals in money and other financial services banks accept deposits, pay interest to depositors, make loans, invest their investor's money, and offer other financial services to their clients

E savings and E checking accounts

an online bank less expensive to own and run you don't have people to pay and they can give higher interest rates to the customer (online) no teller limited give you higher interest rates because less expensive to run how you access your money is different over mail

federal reserve functions

board of governors 12 fed banks mentally policy (they set the monetary policies of this country) bank supervision

short term money

money needed to pay for living expenses for the next 6-12 months (food, clothes, gas)

medium term money

money to provide a "cushion" beyond living expenses 1-2 years

NCUA

national credit union administration ($250,000) per depositor, per bank credit union banks

credit unions

non profit, cooperative financial institutions that are owned and operated by the people who use them members usually all share something in common (job, community, place of worship), although today, the rules are somewhat relaxed rules are called "field of membership" don't like to be called banks like a bank but their rates are better better interest rates on savings when they give loans their type of customer is whoever is in that field of membership to join insured by NCUA

what is the difference between the federal reserve bank and other banks?

other banks: individuals and businesses the fed: the federal government and other banks

investing

putting your money to work: riskier, can lose the principle may be a higher rate of return long term money

the board of governors

regular board members are also appointed by the president and confirmed by the senate the full term of a regular board member is 14 years after serving a full term a regular board member cannot be reappointed

the board of governors...

regular board members are also appointed by the president and confirmed by the senate the full term of a regular board member is 14 years after serving a full term, a regular board member cannot be reappointed

regular checking accounts

safe way to transfer money a check is considered a legal document which is valid proof of satisfaction of debt checks are safer than cash an account where you can put money into multiple deposits and withdrawals does not earn interest you can write a check you can use a debit card no current average interest rate they may charge you a fee depending on your type of checking account restrictions depends expecting to write a check to someone else many fees

regular savings

savings accounts earn interest current average rate .02% multiple deposits and withdrawals- you are allowed to make multiple withdrawals and deposits no restrictions on withdrawals or deposits might be some restrictions on balances access savings accounts by going to the bank and go up to the teller you deposit your money through the bank teller ATM machines (automated teller machine) online (computers you can manage your money online) on an app they might have restrictions for higher level accounts

SIPC

securities investor protection corp ($500,000 cash and securities per investor, per bank) investment banks

commercial banks

specialize in services and benefits for business (such as business loans and business checking accounts) today, offer many of the same services and benefits to individuals as do thrifts and S&Ls think of commerce large mega billion dollar conglomerates national primary type of customer- big businesses insured by FDIC

what is the FDIC

the FDIC is an independent agency of the United States government in short, accounts in insured banks are protected up to $250,000, per depositor, per bank for example, if you have 2 accounts at 2 separate banks, you would be insured up to $500,000

who leads the board of governors

the chairman and the vice chairman lead the board they are appointed by the president and confirmed by the senate the nominees to these posts must already be members of the board the terms of chair and vice chair are 4 years and they can be reappointed for an additional 4 year terms

interest

the cost of borrowing money

what is the board of governors

the fed is overseen by a board of governors (located in Washington DC) it is made up of 7 total members 1- fed chairman 1-fed vice chairman 5-board member

the fed's fund rate

the rate that depository institutions charge one another for loans (1.5%)