FIL 240 1st Edition Lecture 4 Outline of Last Lecture I Interest Rates A Risk free rate equation II Money A Definition of money B 3 types of money C Definition of liquidity III Debt A 3 types of debt B Face value C Definition of inverted yield curve Outline of Current Lecture I Financial Intermediation II Federal Reserve Act a Definition of Federal Reserve Board b District Banks c Regulation Supervision d Federal Reserve Duties e Definition of Fiscal Policy f Definition of Monetary Policy g Federal Reserve Policy III 3 Tools of Monetary policy a Required Reserve Ratio b FOMC Current Lecture Federal Reserve System I Financial Intermediation Banks Credit Unions Savings Loans Thrifts Insurance Companies Investment Banks These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute II III Federal Reserve Act Established the Federal Reserve System central bank that divides the country into 12 regions controls the money supply oversees banking operations a Federal Reserve Board 7 governors one is chairman appointed by President with oversee by the Senate Highly professional objective b Each of the 12 districts has a district bank with a district bank president watch all the banks in the region and sometimes have branches elsewhere in the district c Federal Reserve Board regulates Districts banks supervise d Federal Reserve has 3 duties regulates supervises banks under its authority bank for banks conducts monetary policy e Fiscal Policy taxing spending Congress decides fiscal policy f Monetary Policy how much money is printed what kind of money Congress decides monetary policy g Federal Reserve Policy took monetary policy out of the hands of Congress Federal Reserve Board of Governors decides everything it is an independent agency 3 Tools of Monetary Policy Open market operations OMO purchase sale of securities in the open market by a central bank Discount rate Required Reserve Ratio a The Fed sets the required reserve ratio based upon the size of the bank for first 10 000 000 there is no reserve ratio b Federal Open Market Committee FOMC sets discount rate 12 voting members 7 governors permanent 4 district bank presidents with rotating 2 year terms NY district bank president
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