Federal Reserve

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Insurance Journal  7 hrs ago  Comment 
Former Federal Reserve Chairman Ben Bernanke said he wasn’t looking to punish American International Group Inc. for mismanagement when the board of governors authorized an emergency loan to the distressed insurer at a steep interest rate and...
Clusterstock  10 hrs ago  Comment 
Last week's stock market sell-off put the Dow Jones Industrial Average in the red for the year. "What strikes me most about all this is the sheer complacency," said Walter Zimmerman, chief technical analyst for United-ICAP. "The most pervasive...
Bloomberg  Oct 12  Comment 
Fed Officials Ready to Slow Tightening If World Growth Disappoints Federal Reserve officials sounded an alert over the threat to U.S. growth from a slowdown elsewhere in the...
MarketWatch  Oct 12  Comment 
Fears that the Fed’s first rate hike would damage the global economy are overstated, says Federal Reserve Vice Chairman Stanley Fischer.
SeekingAlpha  Oct 12  Comment 
By Sy Harding: My concerns about high market valuations, excessive investor euphoria, the Fed eliminating its QE stimulus, growing economic woes in euro-land and so forth, became more serious when my firm's technical indicators triggered a sell...
Reuters  Oct 12  Comment 
For Federal Reserve officials already worried about a persistent lack of U.S. wage and price growth, one corner of the bond market may be suggesting even more reason for alarm. The Treasury Inflation Protected Securities (TIPS) market is...
Mondo Visione  Oct 12  Comment 
The Board of Governors of the Federal Reserve System and the Federal Deposit Insurance Corporation welcome the announcement today by the International Swaps and Derivatives Association (ISDA) of the agreement of a new resolution stay protocol....
Bloomberg  Oct 11  Comment 
Tarullo Says Too Soon to Declare Too-Big-to-Fail Is Over Federal Reserve Governor Daniel Tarullo rejected the notion that regulators have completed their work to ensure that...




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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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