Unit F Banking

1
Unit F Banking

• 7.01 Analyze the roles and responsibilities of
  the
• Federal Reserve

2
Structure of the Federal Reserve System

• Organized by the Federal Government in 1913 to
  supervise and regulate banks.
• Assists banks with serving the public more
  efficiently.
• Known as the banks bank. The Federal Reserve
  System is the central bank of the United States.
• All national banks are required to join the
  Federal Reserve System
• State banks have the option of joining the
  system.

3
Structure of the Federal Reserve System

• Federal Reserve Board (FRB) governing body of
  the Federal Reserve System. Its seven members
  are appointed by the President, subject to Senate
  confirmation, and serve 14-year terms. The board
  establishes Federal Reserve System policies on
• Reserve requirements and bank regulations
• Sets the discount rate
• Tightens or loosens the availability of credit in
  the economy
• Regulates the purchase of securities on margin

4
Divisions of the Federal Reserve

• Divisions are called districts. There are 12
  districts in the United States, located in the
  following cities
• Boston, New York, Philadelphia, Cleveland,
  Richmond, Atlanta, Chicago, St. Louis,
  Minneapolis, Kansas City, Dallas, and San
  Francisco.
• Every state comes under a district.
• Each Federal Reserve Bank is a corporation, owned
  by its member banks.

5
Federal Reserve Activities

• Fed supervises banks.
• Accepts deposits of member banks.
• Some federal tax money is deposited in the
  Federal Reserve Bank.
• The Fed holds a checking account for the United
  States Treasury.
• Lends money to member banks.
• Inspects banks yearly through auditing financial
  records.

6
Federal Reserve Activities

• Holds reserves.
• Bank must keep a percentage of their funds on
  deposit with the Federal Reserve.
• Protects depositors money just think Federal
  Deposit Insurance Corporation (FDIC) insured
  symbol.
• Helps the banking system operate more
  efficiently.

7
Federal Reserve Activities

• The Fed sets standards for consumer legislation
  dealing with lending and credit.
• Sets limits for loans and investments by member
  banks.
• Approves bank mergers.

8
Federal Reserve Activities

• Fed participates in open market operations by
  buying and selling federal government securities
  (treasury bills and bonds).
• Regulates money supply
• The Federal Reserve clears checks between banks
  in different cities. Electronic Funds Transfer
  (EFT) and automated clearinghouses are used to
  accomplish this.

9
Federal Reserve Activities

• Most frequent method of controlling the economy.
• Buys and sells federal government securities
• Monitors the reserve requirement
• Monitors the discount rate
• Supplies paper currency