Federal Reserve

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Financial Times  4 hrs ago  Comment 
Central banks around the world own 60% of $10.5tn Treasury market – how will they react when the Federal Reserve ends its monthly bond purchases?
The Economic Times  5 hrs ago  Comment 
Bill Grosssaid yield on the benchmark 10-year US Treasury note belongs in the 2.50-3% range “now and for the next few years” if the Federal Reserve remains accommodative.
Bloomberg  9 hrs ago  Comment 
Fed Researchers Optimistic on Long-Term Unemployment Drop Federal Reserve researchers said they see a “number of reasons to be optimistic” about improvement in the U.S....
Clusterstock  Jul 21  Comment 
Citigroup currency strategist Steven Englander notes that the market is in a fragile position, and that there are two events coming up that could derail things: The two big risk events are the US CPI and next week’s FOMC. We already saw...
Forbes  Jul 21  Comment 
From stories in the popular press to dire analytical reports to pronouncements from Federal Reserve Chair Janet Yellen to statements from the OCC, a growing chorus is warning of a bubble in the leveraged loan market. Driven in part by the...
SeekingAlpha  Jul 21  Comment 
By Charlie Bilello: "When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you've got to get up and dance. We're still dancing." - Chuck Prince, July 10, 2007 [Joe Kernen: You have been...
SeekingAlpha  Jul 21  Comment 
By Invesco: About the Mid-Year Review series: I've been examining some of investors' main concerns about the current economic and market conditions, many of which are detailed in my July commentary, "Mid-Year Review: Six Investor Concerns That...
Forbes  Jul 21  Comment 
“Buy low, sell high.”  It’s a sure-fire prescription for making money on Wall Street…if you can do it.
Motley Fool  Jul 21  Comment 
Are big biotechs -- Amgen, Biogen Idec, Gilead Sciences, and Celgene -- really overvalued, or is the Fed chairwoman looking at smaller companies?
Clusterstock  Jul 21  Comment 
The Federal Reserve is very close to achieving its policy goals. In June, St. Louis Fed President James Bullard gave a presentation outlining just how close the Fed was to its stated goals. In that presentation, Bullard argued that not only was...




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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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