Federal Reserve

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With the prospect of stiffer sanctions against Russia rattling confidence in Europe, investors will be looking to the United States and China to underpin the global economy. Wednesday's U.S. gross domestic product (GDP) reading and jobs data on...
Benzinga  Jul 26  Comment 
After months and months of waiting for an expansion, Goldman Sachs (NYSE: GS ) downgraded US stocks on Friday to Neutral for the next three months. The downgrade is driven by the expectation that rates will increase and cause equity returns to...
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By Chris Ciovacco: Debate About First Rate Hike Looms Even if you follow the markets from a distance, you know the Fed's near-zero interest rate policies have played a big role in the stock market's recent gains. Markets get jittery when...
MarketWatch  Jul 26  Comment 
Small-cap companies collapsing this hard and quick is unusual considering where the Fed thinks the economy is headed, says Michael Gayed.
Wall Street Journal  Jul 26  Comment 
Federal Reserve officials will likely move closer to ending their purchases of mortgage and Treasury bonds at a policy meeting next week and discuss when and how to raise interest rates.
Reuters  Jul 26  Comment 
Even if data next week shows a mediocre rebound in U.S. economic growth, that might be enough to keep the stock market aloft at record highs and the Federal Reserve steadfast in its winding down of stimulus through bond purchases.
MarketWatch  Jul 25  Comment 
Small-cap companies collapsing this hard and quick is unusual considering where the Fed thinks the economy is headed, says Michael Gayed.
SeekingAlpha  Jul 25  Comment 
By Charlie Bilello: In December 2008, the Federal Reserve embarked upon the most expansionary monetary policy in U.S. history. In an unprecedented action, the Fed moved its Federal Funds Target Rate to a range of 0% to 0.25% and began its first...
Reuters  Jul 25  Comment 
Even if data next week shows a mediocre rebound in U.S. economic growth, that might be enough to keep the stock market aloft at record highs and the Federal Reserve steadfast in its winding down of stimulus through bond purchases.
SeekingAlpha  Jul 25  Comment 
By David Moenning: This remains one of the most hated bull moves that I've seen in my career. Stocks have been running higher for more than 5 years now and the gains that have been available are downright impressive. And yet, investors continue...




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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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