Federal Reserve

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The Straits Times  2 hrs ago  Comment 
April 30, 2013 12:24 PM WASHINGTON (AP) - A combination of scant inflation and still-modest US economic growth will likely lead the Federal Reserve this week to maintain its drive to keep borrowing costs at record lows indefinitely.     
Reuters  2 hrs ago  Comment 
Asian shares advanced on Tuesday with investor risk appetite bolstered by expectations for U.S. Federal Reserve and the European Central Bank to continue with growth-supportive monetary stimulus measures.
CNNMoney.com  3 hrs ago  Comment 
The famously gloomy economist Nouriel Roubini has finally fingered an investment he likes. But his advice carries an expiration date.
Samurai Trader  8 hrs ago  Comment 
Well, I thought for sure today would be the day, a breakout with a follow through day, since it looked like we would be going straight up all day. Well, the gain was fine, and we did hit a new high, but the bad news is that volume was, to be kind,...
MarketWatch  10 hrs ago  Comment 
U.S. stocks tallied strong gains on Monday, positioning the S&P 500 index for April gains that would represent its longest monthly win streak since September 2009, as Wall Street embraced corporate earnings and expectations that the Federal...
Clusterstock  11 hrs ago  Comment 
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Market Intelligence Center  Apr 29  Comment 
We live in a low interest rate world. In its attempt to keep the economic recovery moving in the right direction, the Federal Reserve has kept interest rates at historic lows, which has made it much more difficult for investors to find easy ways...
Benzinga  Apr 29  Comment 
1. Every central bank in the world is pumping money into the financial system. The Federal Reserve started this so-called zero interest rate policy for the too big to fail banks in December 2008. They have also started their third round of bond...
New York Times  Apr 29  Comment 
The share of Americans holding jobs has failed to improve much over the last three years, but Federal Reserve officials show little interest in expanding their stimulus campaign.     




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The Federal Reserve is the third central bank of the USA. It was legally established on December 23, 1913, when US president Woodrow Wilson signed the Federal Reserve System Act. The Federal Reserve was blamed to have deepened the Great Depression after the crash of 1929. In a panicky reaction it then deflated money supply, causing a lasting and deep economic contraction.

In the inflationary period from 1973 - caused by the first oil shock - to 1981 chairman Paul Volcker managed to battle inflation successfully by raising the leading interest rate to more than 20%. At the same time Volcker succeeded in keeping the economy out of a drawn-out recession.

The policy style changed with the nomination of Alan Greenspan in 1987. Only 2 months into office Greenspan was confronted with the Black Monday of 1987, when the Dow Jones Industrials Average fell 22%, its biggest loss ever in a day. Remembering the fatal results of tight liqudity after the crash of 1929 Greenspan offered banks all the funds they needed in order to avoid a meltdown of the stock market. Alan Greenspan can also be credited with blowing up the biggest debt bubble of all times in the new millennium. By lowering the Fed Funds rate to a record low of 1% the Federal Reserve contributed heavily to the American housing boom that turned out to be a bubble based on easy credit. Greenspan conceded in 2008 to Congress that he erred on wrong side when the Federal Reserve thought that the financial industry should not be burdened with more oversight. At this time the USA had fallen in the biggest financial crisis ever.

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The Federal Reserve Banks

The 12 Federal Reserve Banks were established by Congress as the operating arms of the nation's central banking system. Many of the services provided to depository institutions and the federal government by this network of Reserve Banks are similar to services provided by commercial banks and thrift institutions to business customers and individuals.

Reserve Banks

  • hold the cash reserves of depository institutions and make loans to them
  • move currency and coin into and out of circulation, and collect and process millions of checks each day
  • provide checking accounts for the Treasury, issue and redeem government securities, and act in other ways as fiscal agent for the U.S. government
  • supervise and examine commercial banks that are members of the Federal Reserve System for safety and soundness
  • participate in the activity that is the primary responsibility of the Federal Reserve System, the setting of monetary policy.
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