Federal Reserve

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Reuters  1 hr ago  Comment 
The BSE Sensex will jump to new record highs over the next year and beyond as a brighter economic outlook will attract foreign investment even if the U.S. Federal Reserve tightens policy, a Reuters poll predicted.
The Hindu Business Line  1 hr ago  Comment 
The euro fell to its lowest in 22 months against the dollar on Thursday, amid prospects of diverging monetary policies between the Federal Reserve and the European Central Bank. The singl...
Bloomberg  8 hrs ago  Comment 
Fed Trio Urges Patience on Interest Rates Amid Cooling Inflation Three Federal Reserve presidents are calling for patience as the central bank weighs when to raise interest...
SeekingAlpha  Sep 24  Comment 
By Don Dion: Several days ago, The Wall Street Journal reported that Credit Suisse Group AG (NYSE:CS) had been the recipient of a "Matters Requiring Immediate Attention" letter from the Federal Reserve. The letter specified identified problems...
Yahoo  Sep 24  Comment 
If economic conditions abruptly change for the better, the Fed might have to hike rates faster than expected ... which could spell trouble for the bull market.
SeekingAlpha  Sep 24  Comment 
By Lior Cohen: The weakness in the gold market has also reflected in the fall in the price of SPDR Gold (NYSEARCA:GLD) - the ETF lost 5% during September. Will GLD recover from its recent fall? Let's review the latest developments related to GLD,...
newratings.com  Sep 24  Comment 
WASHINGTON (dpa-AFX) - The dollar strengthened against major rivals Wednesday as encouraging news on the U.S. housing sector raised speculation the Federal Reserve will hike interest rates ahead of schedule. New home sales in the U.S. saw a...
Yahoo  Sep 24  Comment 
As William Dudley goes, so often goes the Fed. Just this May, Dudley said the Fed's plan to cease reinvesting assets on its balance sheet before raising interest rates "may not be the best strategy." Last week, Chair Janet Yellen said fellow...




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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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