FIL 240 1st Edition Lecture 4 Outline of Last Lecture I. Interest RatesA. Risk-free rate equation II. MoneyA. Definition of moneyB. 3 types of moneyC. Definition of liquidityIII. DebtA. 3 types of debtB. Face valueC. Definition of inverted yield curve Outline of Current Lecture I. Financial IntermediationII. Federal Reserve Acta. Definition of Federal Reserve Boardb. District Banksc. Regulation & Supervisiond. Federal Reserve Dutiese. Definition of Fiscal Policyf. Definition of Monetary Policyg. Federal Reserve PolicyIII. 3 Tools of Monetary policya. Required Reserve Ratiob. FOMCCurrent LectureFederal Reserve SystemI. Financial Intermediation- Banks- Credit Unions- Savings & Loans (Thrifts)- Insurance Companies- Investment BanksThese 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. Federal Reserve Act - Established the Federal Reserve System – central bank that divides the country into 12 regions; controls the money supply; oversees banking operationsa. Federal Reserve Board – 7 governors, one is chairman; appointed by President with oversee by the Senate - Highly professional & objectiveb. 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 districtc. Federal Reserve Board regulates; Districts banks supervised. Federal Reserve has 3 duties – regulates & supervises banks under its authority, bank for banks, & conducts monetary policye. Fiscal Policy – taxing & spending, Congress decides fiscal policyf. Monetary Policy – how much money is printed, what kind of money, Congress decides monetary policyg. Federal Reserve Policy – took monetary policy out of the hands of Congress – Federal Reserve Board of Governors decides everything – it is an independentagencyIII. 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 Ratioa. 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
View Full Document
Unlocking...