Federal Reserve

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SeekingAlpha  5 hrs ago  Comment 
Benzinga  6 hrs ago  Comment 
Last Thursday, the Federal Reserve moved its public relations presence to the 21st century and launched a Facebook page. According to the Fed’s first post, it wants to use the page with "the aim of increasing the accessibility and...
Forbes  7 hrs ago  Comment 
There is a new debate emerging among policymakers in advanced economies. Two Federal Reserve Bank chief executives have taken the position that the natural rate of interest in the United States is much lower than previously assumed. These experts...
Benzinga  7 hrs ago  Comment 
GBP/USD is trading at 1.3249, up 0.0052. The pair is trading choppy and some early session gains have eroded as overseas forex traders prepare to wind down trading for the day. Chatter about possible market impacts from the upcoming speech...
MarketWatch  8 hrs ago  Comment 
U.S. stocks on Wednesday edged lower at the open as investors awaited data on sales of existing homes in July. The S&P 500 index lost 2 points, or 0.1%, to 2,185. The Dow Jones Industrial Average slid 21 points, or 0.1%, to 18,525. The Nasdaq...
Financial Times  9 hrs ago  Comment 
Prospects of tighter US monetary policy may weigh in shorter period
Benzinga  9 hrs ago  Comment 
USD/CAD is trading at 1.2938, up 0.0018. The pair is trading just under the session highs. Market chatter U.S. economic data due out later today and fluctuations in crude oil prices has kept buyers and sellers active. Market talk...
Benzinga  10 hrs ago  Comment 
EUR/USD is trading at 1.1265, down 0.0035. The pair has extended the session losses. Market talk about headline news and chatter about the upcoming speech from Federal Reserve Chair Janet Yellen at the Jackson Hole Symposium on Friday is...
MarketWatch  12 hrs ago  Comment 
U.S. stocks on Wednesday finish at their lowest levels since Aug. 4 as selling in health-care shares, sparked by intensifying outrage over the pricing of a lifesaving drug by Mylan, put pressure on the broader market.




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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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