Federal Reserve

MarketWatch  Oct 2  Comment 
Remember when the prospect of a delayed Federal Reserve interest-rate hike would send stocks rising? The worm has turned. Here’s why.
Clusterstock  Oct 2  Comment 
Stock markets across Europe took a big knock from the US on Friday, but recovered to end the day with modest gains. Markets across Europe had opened higher Friday morning, but figures from the US showed far fewer jobs had been created in...
Clusterstock  Oct 2  Comment 
"No matter how hard you work the boss is only going to give you 2.2% this year," Bank of Tokyo-Mitsubishi's Chris Rupkey said. Rupkey's referring to the lackluster year-over-year growth rate in average hourly earnings. The latest measure was...
New York Times  Oct 2  Comment 
The Labor Department reported a gain of 142,000 jobs in September, and the August figure was revised downward, though unemployment remained at 5.1 percent.
The Economic Times  Oct 2  Comment 
If the widely watched US nonfarm payrolls data is strong, analysts expect it may signal the Federal Reserve to raise rates soon.
Yahoo  Oct 2  Comment 
Ben Bernanke recalls the September weekend in 2008 when regulators sought desperately but in vain to save the investment bank Lehman Brothers as a "terrible, surreal moment." "We were staring ...
Reuters  Oct 2  Comment 
Gains for European and Asia stocks capped a wild week for financial markets on Friday, ahead of a key U.S. jobs report that could determine the chances of the Federal Reserve raising interest rates before year-end.
New York Times  Oct 1  Comment 
Investors were looking ahead to Friday’s payroll report, which could provide guidance on when the Fed will raise interest raise.


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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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