chapter 13

Question 1

origins of Fed establishment

Answer 1

resentence to establishment, fear of centralized power

no lender of last resort

Fed Reserve Act of 1913 to elaborate a system of checks and balances

Question 2

2 unique features of Fed

Answer 2

decentralized central bank w/ 12 regional banks

quasi-public, part private part gov owned

Question 3

How many FRBs

Answer 3

12

Question 4

How many member commercial banks

Answer 4

2900

Question 5

3 largest FRBs

Answer 5

NYC, SF, Chicago

NYC makes up 25% assets

50% all together

Question 6

What does the Board of Governers set, review and determine?

Answer 6

Reserve requirements

discount rate

Question 7

what does the FOMC direct and advise?

Answer 7

directs OMOs

advises Reserve requirements and discount rate

Question 8

What do the 12 FRBs establish?

Answer 8

discount rates

Question 9

Who owns each FRB?

Answer 9

private commercial banks in the district

these member banks hold stock in the district FRB and receive dividends, but cannot trade shares

Question 10

How many directors does each FRB have?

compositon?

Answer 10

9

3 professional bankers
3 prominent leaders from industry, labor, agriculture, or consumer
Three are not allowed to be officers, employees, or stockholders of banks

Question 11

who appoints the president of each FRB?

Answer 11

all directors except class A (pro bankers)

Question 12

who establishes discount rate from FRBs?

Answer 12

directors

Question 13

who decides which banks can obtain discount loans from FRBs?

Answer 13

the FRB as a whole

Question 14

How many of the 12 bank presidents have vote in FOMC?

Answer 14

only 5

Question 15

functions of FRBs

Answer 15

clear checks

issue new currency

withdraw damaged currency

administer and make discount loans to
district member banks

evaluate M&A

Question 16

role of NYC FRB

Answer 16

involvement in forex and OMO

houses desks for open markets and forex

Question 17

3 most important officials in Fed

Answer 17

chair of BOG

vice-chair of BOG

pres of NYC FRB

Question 18

who are member banks?

Answer 18

All national banks

commercial banks chartered by states may choose

Question 19

How long are BOG terms?

Answer 19

14 yr, non renewable

Question 20

Jow long are chairman terms

Answer 20

4 yr, renewable

Question 21

How often does FOMC meet

Answer 21

8/yr

every 6 weeks

Question 22

who does the FOMC consist of?

Answer 22

7 members of BOG

pres of FRB NYC

Pres of 4 other FRBs

Question 23

who is chairman of FOMC?

Answer 23

chairman of BOG

Question 24

Fed case for independence

Answer 24

more political pressures could impose bias on monetary policy

democratic politicians are short-sighted with campaigning issues

Question 25

case against Fed independence

Answer 25

undemocratic to have monetary policy controlled by elite group public holds president and congress responsible for economic well-being, but not fed monetary and fiscal policy should be aligned Fed has not used freedom successfully

Question 26

diff between european system of central banks and Fed

Answer 26

countries control their own budgets, ECB has lower power than board of governors monetary operations conducted by each country, not centralized ECB does not supervise and regulate financial inst